The benchmark BSE Sensex crashed by over 344 points and the NSE Nifty dipped below 8,200-mark in early trade today as investors engaged in cutting down their bets. Internationally, the dollar traded within sight of its highest level in more than 13-1/2 years as bond yields soared on expectations that President-elect Donald Trump’s economic policies will fuel inflation. On Dalal Street, Midcap and Smallcap stocks were the worst hit. We take a look at some major reasons that triggered the sharp fall in Sensex:
1) Rupee: The rupee dropped by 42 paise to trade at 67.67 against the US dollar in early trade today at the forex market. Forex dealers said continued demand for the American unit from importers and the greenback’s persistent gains against other Asian currencies since Donald Trump’s unexpected win in the US presidential election on November 8, was putting pressure on the rupee. Currency analysts are of the view that the pain may not last long, and that with rupee’s recent appreciation spree, it bodes well for the currency to depreciate a bit.
2) Possible US Fed Hike: The dollar and the US treasury yields are soaring ever since Republican nominee Donald Trump won the presidential election in US. There are fears that Trump policies will trigger a rise in inflation in the US, which may create ample room for the US Fed to go for more than one rate hike.
3) Demonetisation effect continues: With the government banning old Rs 500, Rs 1000 notes, the pain of the cash crunch is expected to last a few months. Real estate, consumption and NBFC stocks are under pressure. Earlier today, Chris Wood of CLSA too said that “Recovery in realty sector to be delayed on back of demonetisation.”