In what the media and market newbies call a “crash”, this week saw a 2% decline in the Nifty, giving people a much-needed reality check about their portfolios.
As your holdings bleed, we take a trip back into the week to see what happened in the markets amidst the turbulence in the sea of red.
1. Valuation Scare
With a multitude of factoids and numbers flowing in, Wednesday truly marked the day when investors got a valuation wake-up call, as the markets fell by more than 1% in a single day. This doesn’t seem like a big deal on a macro level, but a few more numbers might put things into perspective:
Particulars | Figure |
|---|---|
Percentage of stocks in the market were trading in the red | 90% |
Number of stocks that hit their 1-year low | 223 |
Nifty Midcap 150 return this week | -4% |
Nifty Smallcap 250 return this week | -6% |
In fact, upon analysing the top 750 stocks in the Nifty (which includes a mix of large, mid and small caps), a whopping 85% of them are down more than 20% from their 1-year highs (essentially, if you invested at the highest price of one of those stocks in the past year, you’d be in deep shit)
With all 19 sectoral indices in the red this week, caution is strictly advised as every finance guru jumped at the opportunity to say that this is just the beginning - and they are probably not wrong.
2. Petrol Prices Slashed
Speaking of sectoral indices, the Oil and Gas sector saw the worst fall, not just because of the overall market crash, but a more specific reason - the fuel price cut
In an attempt to further appease the masses before the elections in April, the state-run oil companies decided to cut the price of petrol and diesel by Rs. 2 per litre
Since this will impact the margins of the oil companies on the bourses, the Oil and Gas Index fell by 5% almost immediately, with stocks like Hindustan Petroleum, Indian Oil, BPCL, and Oil India being the top losers as markets close on Friday
While this is good news for us, being the first cut in price after about 2 years, oil companies might see contracted profitability, with fund houses moving their “Buy” ratings to “Neutral” while the market looks at the numbers
3. Electoral Bond Fiasco Continues
Speaking of elections, the Electoral Bonds (which we covered here) case finally materialised further as SBI launched a list with the names and donation amounts of the largest donor companies - and the country is furious
Donor | Amount |
|---|---|
Future Gaming and Hotel Services | Rs. 1,370 crore |
Megha Engineering | Rs. 970 crore |
Qwik Supply Chain | Rs. 410 crore |
Vedanta | Rs. 400 crore |
Bharti Airtel | Rs. 200 crore |
With these 5 donors making up 40% of all donations to the BJP in the past 5 years, everyone with an internet connection has been trying to decipher the data dump from SBI, with more granularity set to be released about the number of bonds bought and a few more names
Several listed entities like Reliance (with supposed links to Qwik Supply), Adani, Vedanta, Bharati Airtel, and Olectra Greentech have seen their shares consistently decline even after the market fall on Wednesday
Investors are presumably getting spooked by the lack of transparency in these companies as they disguised these donations on their books, hiding facts from the shareholders for years, and with this news gaining further wind as it progresses, faith in the markets might get shakier
Bottom Line - While market falls are normal, this particular week so a culmination of factors resulting in a small bloodbath that could spill over into the coming weeks. Be careful and look out for precautionary exits and timely entries into stocks you’ve been tracking - or just let the experts like us handle this
Comments