5 reasons why the BSE Sensex, Nifty50 tanked in trade on Monday

The BSE Sensex plunged over 1,600 points, while the NSE Nifty dropped below the 17,500-mark in a broad-based sell off.

The key benchmark indices, the Sensex and the Nifty, logged heavy losses in intra-day trade on Monday amid a broad-based sell-off. The Sensex plunged as much as 1,600 points in intraday. Among stocks, index heavyweight Reliance Industries (RIL) was the major dragger after the company over the weekend called-off its deal with Saudi Aramco to divest 20 per cent stake in its oil to chemicals business.

However, Reliance alone was not accountable for the day’s fall – the broader markets too logged heavy losses, with the BSE Midcap and Smallcap indices both down around 2.5 per cent each.

"With the recent correction, markets have entered into consolidation phase where stock specific volatility can be utilized to form the equity portfolios. The stretched valuation segments are witnessing profit booking and money is flowing into value segments where earnings have started to grow after several earnings of stagnation," said Amit Gupta, Fund Manager – PMS at ICICI Securities.

Here are five reasons that led to today’s steep fall:

Sell-off in RIL stock: The Mukesh-Ambani firm alone accounted for nearly one-fourth of the day’s losses on the BSE Sensex after change in plans by the company with regards to Saudi Aramco. Analysts expected the stock to react negatively today. READ MORE

Private lenders bleed: Bajaj Finance, HDFC Bank and ICICI Bank were the other major draggers, accounting for another quarter of the day’s losses. Banks and non-banking financial shares logged heavy losses, as investors preferred to take home some profits given the change in sentiment.

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IPOs dis-appoint: The largest IPO – Paytm – debuted on a dis-appointing note ending at the lower circuit on the day of listing last week. The stock tanked another 13 per cent in trade on Monday. Foreign broking firm Macquarie set a target of Rs 1,200 for the share – a steep 44 per cent discount to issue price. The sell-off has had a rub-off effect on recent listings. Nearly half of the stocks of companies that debuted at the bourses so far in November have now dipped below their respective issue price. READ MORE

Persistent FIIs selling: The foreign institutional investors (FIIs) were net sellers of stocks worth Rs 3,930.62 on Thursday, thus taking the total net selling to nearly Rs  10,000 crore so far this month in the cash segment. This is following Rs 25,572 crore worth selling in October. Since the start of this fiscal year, FIIs have net sold shares to the tune of Rs 75,500 crore. 

Technical break-down: The NSE Nifty had ended below its 50-DMA (Daily Moving Average) for the first time since April 20, 2021. The 50-DMA and 20-DMA were also seen converging, with the 20-DMA likely to dip below the 50-DMA in the next couple of trading sessions. As and when, the 20-DMA dips below 50-DMA, the short-term trend is considered bearish. As per the daily charts, with no significant support visible in the interim, the NSE index seems headed towards the 100-DMA at 17,050-odd levels.