Sensex skids over 1,200 points, but recovers a chunk of the losses on local buying

The Nifty ended down 114.45 points, or 0.67%, at 17,092.20 after plunging as much as 2.5% earlier in the day to 16,843.80. The Sensex ended down 382.91 points, or 0.66%, at 57,300.68, after tumbling as much as 2.2% to 56,394.85.

India’s fear gauge, or volatility index, ended up 16% at 26.66 after touching 27.82 during the day.

Global markets whipsawed, while oil prices firmed up on Tuesday on fears of a full-scale war between Russia and Ukraine intensifying after Russian President Vladimir Putin ordered troops into two rebel-held regions in eastern Ukraine, after recognizing them as independent states, according to reports.

Brent crude inched towards the $100 a barrel mark for the first time since September 2014 amid fears of supply-side disruptions with Russia being one of the top oil exporters. India imports more than 80% of its crude requirement.

“This impacts sentiment and risk-taking ability. What’s going to have a bearing for India is the impact on commodity prices as Russia controls about 12% of the global oil supplies,” said Vinit Sambre, head of equities at DSP Investment Managers.

Brokers said purchases by Domestic Institutional Investors-including the cash flush mutual funds and insurance companies- coupled with covering of bearish beats when the Nifty reached the 16,800 area helped the market cut losses.

DIIs net bought shares worth ₹4,107.58 crore on Tuesday, mopping up the shares sold by FPIs to the tune of ₹3,245.52 crore.

“At present, the 16,800 odd levels tend to provide strong support to the Nifty and till the level is sustained, we might expect some retaliation from the domestic participants at lower levels if there is no aberration on the global front,” said Osho Krishan, sr. analyst – technical & derivative research, Angel One.

Jefferies cut its December target on Nifty to 17,500 on the grounds India’s share valuations are higher than its historical average and even against the regional markets.

“Unwinding of the global liquidity calls for mean reversion on valuations,” said Jefferies. Investors expect the US Fed to raise interest rates more aggressively, while simultaneously withdrawing its Covid-era stimulus programme in the wake of inflationary pressures.

This has kept the markets on the edge in recent months on the back of relentless foreign selling. “Key near-term risks include LIC IPO amidst continued foreign selling, a perception that the RBI might be behind the curve amidst the twin deficit concerns,” said Jefferies. The government is planning to launch the mega LIC IPO in March.

On Tuesday, Tata Steel shares and Tata Consultancy Services fell 3.6% each, emerging as the biggest laggards on the Sensex. State Bank of India, Dr Reddy’s Laboratories, ITC and Bharti Airtel ended down 1.4% to 2.7%.

Small-cap stocks continued to bleed as retail investors dumped these stocks to limit their losses. The SmallCap index ended down 1.6% at 26,697.23. The MidCap index fell 0.7%, in line with the benchmark Sensex.

“Retail investors are in a panic as smallcaps have seen a knock-off from highs and geopolitical tensions don’t do well with the retail investors’ temperament,” said Sambre.