Sensex, Nifty plunge over 1.5% on FPI selling, new virus scare

The market capitalisation, or the total value of all listed shares, of the BSE-listed firms declined by Rs 10.98 lakh crore to Rs 438.79 lakh crore.

“Fears related to the new human metapneumovirus (HMPV) have added to the bearish sentiment, triggering fresh rounds of selling after the recent counter-trend pullback rally,” said Santosh Meena, head of research, Swastika Investmart.

Two cases of the HMPV infection in India were detected in a three-month old girl and an eight-month old boy in Bengaluru. A three-month-old baby tested positive for the HMPV in Ahmedabad, making it the third case to be reported from the country.

Analysts expect the market to remain volatile until concerns over the new virus eases.

Heavy selling in the market by investors was also in anticipation of slower corporate earnings in the third quarter.

“There are already concerns that the forthcoming third quarter earnings could be muted for several sectors due to weak government spending and subdued demand, which is pushing investors, especially the FIIs (foreign institutional investors), to further slash their domestic equity bets,” said Prashanth Tapse, senior VP (Research), Mehta Equities Ltd.

On Monday, foreign investors sold Rs 2,575.06 of domestic shares. This was balanced by buying by domestic institutional investors who purchased Rs 5,749.65 crore of local equities, the BSE’s provisional data showed.

In January so far (until January 6), overseas investors have sold Rs 7,160 crore worth of Indian shares, according to the National Securities Depository Ltd (NSDL) data. The sell-off by FPIs is due to strong dollar, higher US bond yields and on expectation of lacklustre quarterly corporate results.

Among the sectors, all major sectoral indices witnessed profit booking at higher levels, with the public sector banks and capital market indices lost the most, shedding over 3.5 per cent.

On Monday, both Nifty and Bank Nifty slipped below their 200-day moving averages (DMA). Nifty PSU Bank index dropped 4 per cent.

“We believe that the current market texture is weak but oversold; therefore, level-based trading would be the ideal strategy for day traders,” said Shrikant Chouhan, head equity research, Kotak Securities.

For day traders, as long as the market is trading below 23,750/78,200, weak sentiment is likely to continue. Below this level, it could retest the 23,500/77,600 mark. Further downside may also occur, potentially dragging the index down to 23,400/77,300. Conversely, if it rises above 23,750/78,200, the market could bounce back to the 23,900-23,950/78,600-78,800 range, he said.

Investors will now focus on the next month’s Union Budget announcement and the government’s action plan to boost demand and measures to overcome global challenges.