The BSE Sensex on Tuesday tanked by 514.19 points to end at 26,304.63 on worries about capital outflows as U.S. bond yields surged and the dollar strengthened, and as heavyweight Tata Motors, mired in a corporate power struggle, plunged after reporting weak earnings. The Nifty cracked below 8,200-mark and fell 187.85 points to 8,108.45. The Chinese yuan broke through 6.86 per dollar to its weakest since December 2008 and last traded at 6.85. The dollar pulled back from close to 14-year highs on Tuesday, euro zone government bond yields fell and the price of copper tumbled as traders cashed in gains from a rally fuelled by Donald Trump’s victory in the U.S. presidential election.
BSE Sensex on Friday had crashed about 699 points, its biggest single-day fall since February 11, to drop below the key 27,000-level on sustained foreign fund outflows combined with weakening trend globally. Besides, the rupee breaching the 67—mark against the US dollar by plunging 59 paise to 67.22 (intra—day) at the forex market too had its bearing. Notably, stocks exchanges remained closed yesterday on account of ‘Guru Nanak Jayanti’.
Below are the reasons why Sensex fell over 400 points today.
1. Demonetisation Impact: Prime Minister Narendra Modi’s historic decision to demonetise higher denomination notes is playing a crucial role behind this slide. The currency demonetisation so far has quite a bit of implications.
2. Volatile Rupee: Rupee depreciation, foreign fund outflows and lower global crude oil prices depressed the Indian equity markets on Tuesday. The two key indices of the Indian equities markets provisionally closed the day’s trade with losses of around two per cent each, as heavy selling pressure was witnessed in automobile, banking and metal stocks. Investors engaged in cutting down their bets after the rupee dropped by 42 paise to trade at 67.67 against the US dollar in early trade at the forex market.
3. Donald Trump: Brokers said sentiments remained bearish on continued foreign fund outflows and weakness in emerging market currencies against the dollar since Donald Trump’s unexpected win in the US presidential election on November 8. There is a lingering uncertainty over future policies of Trump. Notably, euro zone government bond yields fell and the price of copper tumbled as traders cashed in gains from a rally fuelled by Donald Trump’s victory in the US presidential election.
4. Subdued Asian Markets: In overseas markets, Asian stocks were trading mixed. The US stocks closed little changed yesterday, after rising dramatically the week before and a decline in the technology sector offset a steep rise in financial stocks as investors bet on higher interest rates. In the Asian region, Japan’s Nikkei fell 0.13 per cent, while Shanghai’s Composite index plunged 0.27 per cent in early trade. Hong Kong’s Hang Seng was up 0.37 per cent. A mixed trend at these Asian markets too influenced the trading sentiment.China’s yuan, which like other Asian currencies has been under pressure since the election, fell to its weakest level against the dollar in almost eight years.
5. Weak Earnings: Shares of Tata Motors today tumbled 9 per cent after the company’s standalone net loss widened to Rs 631 crore in the September quarter. The stock plunged 8.93 per cent to Rs 462.05 on BSE. On NSE, shares of the company tanked 9 per cent to Rs 461.35. On standalone basis, Tata Motors’ net loss widened to Rs 631 crore for the quarter under review compared to Rs 289 crore in the year-ago period. The company’s standalone net sales were at Rs 11,406 crore as against Rs 11,794 crore in the year-ago period, down 3.28 per cent.