The S&P BSE Sensex slid on Thursday as investors booked profits after the equity benchmark scaled the 50,000 points mark for the first time.
Expectations that companies will reported improved earnings for the third quarter, combined with sustained purchases by Foreign Institutional Investors (FIIs) have buoyed stocks in recent sessions and the Sensex crossed the key 50,000 threshold when it opened higher at 50,097 points before touching an intraday high of 50,184.
But a combination of caution and keenness to book profits, dragged the index down by as much as 785 points until some late bargain hunting helped limit the scale of losses. The Sensex closed 167 points, or 0.34%, lower at 49,625.
‘Just the start’
“It is a historic day for India, the Sensex has touched 50,000 mark. In 1979 it was at 100,” said the BSE’s MD & CEO Asishkumar Chauhan. “What has been done in India in the last 40 years has reflected in the Sensex touching 50,000. It is just the start,” he added.
Stock indices have rallied sharply since plunging to their lowest levels in more than three years in March in the wake of the COVID-19 pandemic’s outbreak.
“The positive thing about the ongoing rally is that it has been fairly broad-based; across market caps and sectors,” said Joseph Thomas, Head of Research, Emkay Wealth Management. “As the panic and crash [in March] was pandemic infused, the pull-back was led by pharma and since then banks, IT and auto have also gradually moved up. A broad-based rally should be underpinned by a healthy economic growth and that would be the key variable providing indications how the future trajectory of risk assets shapes up,” he added.
Reserve Bank of India (RBI) Governor Shaktikanta Das, earlier this month, flagged the disconnect between the state of the real economy and the stock markets and warned that stretched valuations of financial assets pose risks to financial stability.
‘Warrant some caution’
“The current valuations do warrant some caution with likelihood of increased volatility in the short term,” said Gaurav Awasthi, Senior Partner, IIFL Wealth Management, acknowledging the need for increased vigilance amid the euphoria. “Sensex at 50K is a psychological feel good factor and has no significance on the decision to invest or exit from equity markets. The relevant yardsticks to look at for investing include the current valuations and future earnings trajectory of underlying companies. The longer term view remains positive,” he added.
The NSE Nifty slipped 54 points to close at 14,590.