It was a double whammy for the domestic equity markets on Wednesday as the latest move by the government to curb black money and Republican nominee Donald Trump’s victory over rival Hillary Clinton in the US presidential election triggered across the board heavy selling on the bourses.
The mayhem wiped out around Rs 7 lakh crores of investors wealth in the intra-day trade as the Sensex and Nifty plummeted around 6 per cent, their biggest intra-day fall since August 2015.
However, the markets staged a smart recovery from their day’s low as traders squared off their bearish bets despite the underlying sentiments still remaining cautious.
After opening the day deep in the red, the Sensex plunged 1,688.69 points or 6.12 per cent to hit a low of 25,902.45. The index finally closed the session at 27,252.53, down 338.61 points or 1.23 per cent.
Similarly, the Nifty tanked 494.8 points to a hit an intra-day low of 8,002.25 before ending the day at 8432, down 111.55 points or 1.31 per cent.
“What we saw in the initial one hour of trade was a knee jerk reaction after Mr Trump edged past Mrs Clinton in the race to the White House. While the markets recovered sharply from their days low on the back of short covering in the derivatives segment, investors should be prepared for a high bout of volatility in the coming days,” said Dinesh Thakkar, chairman and MD of Angel Broking.
According to him, the markets could see sector-specific impact once Mr Trump spells out his policies in the coming days.
“Every dip in the market would be a very good buying opportunity for the long-term. The best strategy would be to make a staggering investment at every dip for the next 15-20 days,” he added.
According to the provisional data released by the stock exchanges, foreign portfolio investors (FPIs) offloaded shares worth Rs 2,095 crore on Wednesday.
“Sentiments have eased and investors have reconciled to both the developments. We think this volatility only gives an opportunity to long-term investors to commit more money to their equity investment, as a long-term opportunity in India looks very promising to us. The banning of large denomination currency may be a bit painful in the shorter term but definitely better for the long term in terms of better tax compliance, control on corruption as well as inflation,” said Motilal Oswal.
