This may be more of a panic selling or profit booking triggered by FIIs and domestic institutional investors, feel experts. According to them, the fall may continue for some more time due to correction in oil prices and technical factors but one should not get worried as this is the buying opportunity. The fundamentals of the Indian economy are seen improving, they say.
UR Bhatt of Dalton Capital Advisors says while the steep fall in crude prices is hurting sentiment internationally, India’s macro fundamentals appear sound.
“I don’t think this (correction) will last long,” he says, unless something went dramatically wrong in the Eurozone like Greece going out of the Euro.
The 30-share BSE Sensex closed below the 27000-mark for the first time since December 17, 2014, down 854.86 points or 3.07 percent to 26987.46 while the 50-share NSE Nifty broke the 8180 support level, down 251.05 points or 3 percent to 8127.35. The broader markets crashed too with the BSE Midcap and Smallcap indices losing 2.95 percent each.
Globally, Asian markets except Shanghai closed 1-3 percent lower following weak US cues while European markets were down 0.4-1 percent (at the time of closing of Indian equities) amid widening anxieties about Europe's economy and possibility of Greece quitting the eurozone.
The Euro hit its lowest point against the US dollar in more than 8 years, trading at just 1.19 USD/Euro. "There is some speculation that with the US markets improving, the Euro could very well hit the previous impossible rate of one euro/dollar if crude oil prices continue to weaken, says Raghu Kumar, co-founder of RKSV.
Brent crude extended losses after falling 5 percent in previous session, down 3 percent to USD 51.49 a barrel (at 16 hours IST), the lowest level in last five-and-half-year. NYMEX crude plunged below USD 50 a barrel as growth in oil supplies showed no signs of abating with output in Russia hitting a record high in 2014. NYMEX crude fell 2.72 percent to USD 48.68 a barrel.
Back home, all sectoral indices ended in red with the BSE Oil & Gas index falling more than 4 percent. Bank, Metal and Capital Goods were down more than 3 percent.
ONGC was the top loser on the Sensex, losing nearly 6 percent post fall in crude oil prices. Cairn India was down 3.5 percent.
Shares of ICICI Bank, HDFC, Reliance Industries, TCS, L&T, State Bank of India, Sesa Sterlite, Tata Steel and BHEL crashed 3-5 percent. Index heavyweights ITC, Infosys and HDFC Bank were down 1.5-2.5 percent.
Tata Motors plunged 4.4 percent after the company reported Jaguar Land Rover sales data. US sales for JLR rose 1.8 percent for December with Jaguar sales up 9 percent and Land Rover sales marginally down 0.2 percent.
Telecom stocks were in focus as the Cabinet decided on the 800, 900 and 1800 mega-hertz reserve prices. Morgan Stanley says it expects 900 Mhz auctions to happen at 4 times the 1800 Mhz 2014 price. Idea has highest risk as 92 percent of its 900 Mhz holding coming up for auction. Bharti Airtel has relatively less spectrum coming up for renewal. Bharti was down 0.8 percent and Idea fell 2 percent.
However, Hindustan Unilever was the only stock among Sensex 30 and Nifty 50 closing in green, up 1.9 percent. Deutsche Bank upgraded the stock to buy with a target price of Rs 900 per share. It is positive that HUL's market share gains in most categories and higher royalty expenses and excise duty rise not being margin dilutive will drive the stock.
The brokerage says that HUL may see a weak December quarter earnings, due to delayed onset of winter impacting sales of higher-margin seasonal products during the quarter but it should be used as a buying opportunity. The brokerage also revised earnings estimates by 5-11 percent in FY15-17.
More than 3 shares declined for every share advancing on the Bombay Stock Exchange.
Meanwhile, the HSBC India Services Business Activity Index stood at 51.1 in December -- down from 52.6 in the previous month, indicating a moderate expansion in business activity in December.