The BSE Sensex tanked 551 points on Monday to mark the biggest one-day percentage fall in nearly two months following China’s stock market rout and concerns that possible stricter norms for participatory notes back home may hit foreign investments.
The BSE Sensex ended down 1.96 per cent, marking its biggest single-day fall since June 2.
The Nifty closed 1.88 per cent lower, its biggest percentage fall in a day since June 11.
Here are the 5 reasons why Sensex plunged over 500 points today:
Global markets/China markets rout: Asian shares began the week on a weak note amid losses on Wall Street and worries over China. Hong Kong’s Hang Seng was down 2.50 per cent while Japan’s Nikkei slid 0.98 per cent in early trade on growing concerns about the Chinese economy. The US Dow Jones Industrial Average ended 0.92 per cent down on Friday.
Chinese shares fell more than 8 per cent on Monday amid renewed fears about the outlook for the world’s No. 2 economy.. Major indexes suffered their largest one-day drop since 2007, shattering a period of relative calm in China’s volatile stock markets since Beijing unleashed a barrage of support measures to arrest a slump that began in mid-June.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen plunged 8.6 per cent, to 3,818.73, while the Shanghai Composite Index lost 8.5 percent, to 3,725.56 points.
P-Notes worries: P-Notes are instruments issued by registered foreign institutional investors (FII) to overseas investors, who wish to invest in the Indian stock markets without registering themselves with the market regulator.
Stock market participants are concerned after a Supreme Court-appointed SIT last week suggested Sebi to come up with regulations on collection of beneficial ownership details of P-note holders, as also for monitoring any unusual rise in stock prices.
The government on Monday said a view on the suggestions about participatory notes (P-notes) will be taken only after consultations with SEBI, RBI and others. The statement comes amid fears of negative impact of Special Investigative Team (SIT) recommendation of stricter norms for P-notes on markets. It is to be now seen if the government’s statement will help the stock markets recover.
Corporate earnings: Sustained selling after disappointing earnings posted by majority of bluechip companies affected the market sentiments.
US Fed meeting: Investors across the world are keeping an eye on the Fed’s policy-setting Open Market Committee meets on Tuesday and Wednesday and is considered highly unlikely to lift interest rates just yet, though it does still seem set on a move in September, according to Reuters report.
“We expect Fed voters to pull the trigger in September, but for the path to interest rate normalisation to be a long one given the global risk profile, the lack of inflationary pressure, and concerns over what moving too quickly may do to asset markets, particularly the dollar, and the wider economy,” said analysts at Australia and New Zealand Banking Group to Reuters.
Parliament logjam: The stock markets are not finding any support from the Parliament session either as there is expectation that there would be further delay in the passage of key bills. “The market is not finding any supporting factor to hold its strength. It is depending on Q1FY16 results for providing support to the earnings outlook and Parliament session to kick start reforms, but the market’s confidence is now in question,” said Vinod Nair Head-Fundamental Research of Geojit BNP Paribas Financial Services.
“At present, it seems that participants have started feeling apprehensive about the fate of reforms and growth prospects of the economy as a whole, considering the hindrance at every step. Meanwhile, time wise correction in the markets will continue and index would further consolidate in a broader range,” said Jayant Manglik, President Retail Distribution, Religare Securities.
Experts have said that this week is going to be volatile one for stock markets due to scheduled derivative expiry of July month contract.
With agency inputs