6 reasons why Sensex sank nearly 400 points today

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Updated: August 29, 2017 3:39:18 PM

Indian stock markets fell drastically after opening marginally low on Tuesday with the BSE Sensex losing 390 points. We take a look at six reasons why the benchmark Sensex lost close to 400 points in today.

The benchmark Sensex dipped 1.16% at 31,381.62 points while the broader Nifty declined 1.22% to 9,791.4 points. (Image: PTI)

Indian stock markets fell drastically after opening marginally low on Tuesday with the BSE Sensex losing 390 points in the intraday trade today. The sell-off in the shares of heavyweight companies such as HDFC, Reliance Industries, HDFC Bank further contributed the down surge of the index. Today all of the 31 scrips of BSE Sensex ended in red and all eleven sectoral indices of NSE settled down with losses up to 1.4%. The benchmark Sensex dipped 1.16% at 31,381.62 points while the broader Nifty declined 1.22% to 9,791.4 points. We take a look at six reasons why the benchmark Sensex lost close to 400 points in today.

Huge sell-off in blue-chip stocks

The shares of heavyweight companies such as HDFC, Reliance Industries, HDFC Bank, L&T, Infosys, Axis Bank, ITC, Sun Pharma, NTPC, Kotak Mahindra Bank, Maruti Suzuki, Hindustan Unilever and Bharti Airtel were the biggest losers and contributed the most to the decline of the index. Collectively these 13 stocks alone washed off about 270 points out of 390 points drop in the Sensex.

NTPC shares slump

Shares of NTPC plunged over 3% today on the benchmark Sensex after the government announced that it will sell a 5% stake in the country’s biggest power producer NTPC Ltd over two days to Wednesday. The share sale through an offer for sale (OFS) will happen over two days beginning today. The government will sell 5% through OFS, with an option to retain another 5% in case of oversubscription. The floor price of Rs 168 is at a discount of 3% over Monday’s closing stock price. The government has so far this fiscal raised over Rs 8,800 crore through disinvestment in six companies, including selling a stake in L&T through Specified Undertaking of Unit Trust of India (SUUTI), and one share buyback.

Plunge in large cap shares on Nifty 50 exclusion

Shares of ACC, Bank of Baroda, Tata Power and Tata Motors DVR fell up to 2.4% on Tuesday as these stocks will be removed from the broader Indian benchmark index Nifty 50 with effect from 29 September. In a recent reshuffling, India Index Services and Products Ltd (IISL) which is an arm of the National Stock Exchange (NSE) announced this yesterday as part of its periodic review. These four firms would be replaced by Bajaj Finance, Hindustan Petroleum Corporation Ltd, and UPL Ltd.

Weaker Asian markets

The 30-share barometer Sensex tumbled on Tuesday amid weak Asian cues after North Korea launched a missile over Japan. Geopolitical tensions escalated after North Korea fired a ballistic missile over northern Japan dragged down the indices. Japan’s benchmark Nikkei 225 fell 0.5% to end at 19,362.55 points, while Australia’s S&P/ASX 200 dropped 0.7% to close at 5,669 points. South Korea’s Kospi lost 0.2% to 2,364.74 points. Hong Kong’s Hang Seng shed 0.1% to 27,828.67 points, however, the Shanghai Composite inched up nearly 0.1% to 3,365.23 points.

European shares fell to six month low

European shares were mostly lower Tuesday, as investors were rattled by North Korea’s launch of a mid range ballistic missile that crossed over northern Japan and fell into the Pacific Ocean. France’s CAC 40 dipped nearly 1% in early trading to 5,030.32, while Germany’s DAX fell 0.8% to 12,021.52 points. Britain’s FTSE 100 lost nearly 0.1% to 7,329.63. U.S. shares were also set to drift lower with Dow futures down 0.5% at 21,691 points. S&P 500 futures were also lower, down 0.6%, at 2,428.2 points.

Geopolitical tensions

North Korea fired a mid range ballistic missile into the northern Pacific Ocean on early Tuesday. The aggressive missile launch is likely the longest ever from the North over the territory of a close US ally sends a clear message of defiance as Washington and Seoul conduct war games nearby.  Earlier this month North Korea threatened to fire missiles into the sea near the US Pacific territory of Guam, a host to major US military installations after President Donald Trump warned Pyongyang would face “fire and fury” if it threatened the United States.

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