Mumbai: It was a highly dramatic and scary day as the markets saw their biggest ever fall. It was the worst day of trading in the market history as the pace of the fall was unnerving.
The markets started weak and with heavy bouts of selling was seen during the day with Sensex and Nifty down almost 12 per cent at one point of time. The Sensex went below 17,000 mark during the course of the day and Nifty touched sub-5000 mark.
BSE was shut for a brief period of time, however it resumed trading immediately. Later the Sensex recovered 700 points from the day's low to shut shop down 1,408.35 points or 7.41% at 17605.35. The Nifty finally closed down 496.50 points or 8.70% at 5208.80.
It was a rude shock for the investors who lost over Rs 6.6 lakh crore of market capitalization in just single day.
Market capitalization of all the companies listed on the BSE was Rs 66,17,501.33 crore as on January 18 closing and Rs 59,53,525.87 crore on January 21 closing. Overall, the investors lost Rs 6,63,975.46 crore in just one trading day.
What are market technicals suggesting
It is proving to be an extremely scary session for the markets as fall has continued further.
If you look at the intra-day chart actually, Nifty has bounced back from 5,500 levels. 5,520 is actually the 100-day moving average and it has taken the support from around that level of almost 5,500 and people say this is not actually a strong support because at every high level, there is selling which has come into the picture so unless until it stands out with the market straight above that level consistently, we cannot say that it is going to be a very solid support at 5,500.
But the other level to watch out for is 4,880 which is 200-day moving average but people are saying that it is one level which we need to watch out for.
There are actually two camps in the market right now, one camp is believing that there is a lot of FII selling which is happening and there is selling at higher levels which is coming and in fact India is the last market among the emerging markets which has fallen about 12%-15%. There is a further opportunity for the market fall.
There is another camp, which is saying that the valuation looks attractive for longer-term plays and there is a lot of cash many of us sitting on. So clearly it is very difficult to point out levels at this point in time but then as I mentioned 100-day or 200-day moving average start things to be looked out for.
What Next
Gautam Shah of JM Financial Services says the Sensex may find support around 17,300. "The Sensex can easily bounce back 500-700 points, but the key is how US markets behave overnight. It can bounce back to 18,500 and then fall again." The Nifty has strong support at 4,500-4,600 levels, he said
He feels the worst may be over in the short-term. "The markets are likely to stabilise at current levels. It looks deeply oversold on the daily charts. However, I see more downside in the medium-term."
According to Shah, traders can look at going long at current levels. "However, investors may have to take more rational decisions in the next few days."
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The US markets are very close to important support levels, he said. "A rebound in the US can cause emerging markets to recover."
Raamdeo Agrawal, Director and Co-Founder, Motilal Oswal Securities, said there has been a complete withdrawal of buying from all segments. "Earlier, FIIs were selling but that was being absorbed by retail players."
He feels the market was set up for a steep fall. "However, the extent of loss was surprising."
According to Agrawal, forward multiples on the Sensex have fallen from 20-21x to 17-18x. A lot of technical levels have also been hit on the downside, he said. "The valuations of many stocks look interesting now as they have come down to reasonable levels."
He feels a lot of uncertainties remain in the US markets. "The current environment is very different from the situation during 2006 fall."
"If somebody has money; but whosever has buying power, they must step in and look for their stocks because maybe the markets might fall little more tomorrow, day after. But I think the stocks might have seen their worst today," Agrawal says.
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