Equities fell the most in 14 months on Monday following broad-based profit booking in frontline stocks by domestic institutions.
Foreign investors, however, remained buyers.
The Sensex tanked 430.65 points or 2.15% from 28-month highs to close at 19691.67.
This is the highest absolute daily fall in points term for the Sensex since the benchmark crashed by 477.82 points on February 27, 2012.
The Nifty, too, crashed by 126.80 points to close well below 6000 mark at 5980.45.
Ambareesh Baliga, managing partner - global wealth management at Edelweiss Financial Services, attributes the plunge to profit-booking by the investors and to certain extent by weak trade deficit numbers.
“It was surprising to see such a sharp correction in the indices as there was no major negative triggers. The trade deficit data that came after the markets had fallen quite a bit, probably would have weighed on the market sentiments,” he said.
Domestic investors were net sellers by Rs454.82 crore (as per provisional exchange data) on Monday. They have now sold shares worth Rs42,000 crore since January.
The selloff was across the sectors and stocks as all the 30 stocks on Sensex and 13 sectors listed on BSE ended in red.
FMCG major ITC, which fell 5.31%, was the biggest drag on Sensex contributing to one-fourth or 122.14 points to index fall.
The other major stocks like Larsen & Toubro, TCS, ICICI Bank, Tata Motors and HDFC contributed to another one-fourth.
Experts don’t see the sharp decline in markets extending much beyond 5850-5900 on the downside.
Siddarth Bhamre, Head of Derivatives at Angel Broking expects markets to find support at 5850-5900 levels as the foreign institutional investor (FII) flows continue to remain positive.
“With the kind of global liquidity that is coming into Indian markets, we don’t expect continuation of today’s sharp fall much. We are not negative on the markets and continue to remain stock specific at this moment,” he said.
Foreign investors who have bought shares worth Rs68,279 crore so far this calendar year, were net buyers of equities worth Rs244 crore on Monday.
Baliga believes markets may see some bounce-back on Tuesday given the sharp drop yesterday. But in the near term, he believes that economy seems to be recovering and that should keep markets in 5890-6110 trading range in near term not withstanding any knee jerk reactions on account of political events.