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Sensex retreats 3,800 points from peak; is there more pain ahead?

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Both headline indices Sensex and Nifty50 are now around six percent below their all-time highs. The Sensex is down 3,779.5 points from its peak, and the Nifty down 1,187.9 points. 

Sensex retreats 3,800 points from peak; is there more pain ahead?
It was chaos on Dalal Street on Monday as equity benchmarks Sensex and Nifty50 tumbled amid a selloff across sectors. Financial, oil & gas, automobile and IT stocks were the worst hit. The market crash comes amid concerns over expensive valuations and the return of pandemic-related restrictions in parts of Europe.
The 30-scrip index shed 1,170.1 points to end at 58,465.9 -- its worst single-day plunge since April 12, and the broader Nifty50 benchmark lost 348.3 points to settle at 17,416.6 -- its worst fall since April 30.
Both headline indices are now around six percent off their all-time highs, registered on October 19. The Sensex is down  3,779.5 points from its peak, and the Nifty down 1,187.9 points.
More pain ahead?
A correction was due in the Indian market, Mahesh Nandurkar of Jefferies told CNBC-TV18. However, the corporate earnings outlook appears to be very strong for India, which is in a period of strong economic data and solid earnings growth, he added.
Most analysts believe more pain cannot be ruled out in the near term, which will leave the market healthier for any further upmove.
The market is bound to fall with the same force it has risen, AK Prabhakar, Head of Research at IDBI Capital, told CNBCTV18.com. "The correction was much needed and is going to be healthy. We were running beyond fundamentals and the pricing of IPOs was beyond market expectations. The correction will bring balance to the market," he said.
The Indian market has broken a series of records in the past few months, with investors overlooking fears about expensive valuations.
"When the market is overvalued, as it has been for some time now, some triggers can cause sharp corrections," VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told CNBCTV18.com.
"These triggers have come as a perfect storm in the form of warning by the RBI, downgrading of India by foreign brokerages on excessive valuations and, more importantly, concerns about fresh COVID waves and lockdowns in parts of Europe," he said.
Equity valuations have outstripped traditional indicators, the RBI cautioned recently. Meanwhile, many foreign brokerages have downgraded Indian shares citing expensive valuations.
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