The key Indian stock market indices continued to bleed on Monday, with the benchmark Sensex of the BSE shedding 624 points to an intra-day low of 36,216.95 points and the Nifty 50 of the National Stock Exchange slumping below the 11,000-mark. Market observers said the plunge in the stock markets continued from last week’s sell-off in NBFC stocks on liquidity concerns, amid higher crude prices and a weak rupee.
The BSE Sensex closed Monday’s trade at over a two-month low of 36,305.02 points, down 536.58 points or 1.46%, while Nifty closed 168.20 points, or 1.51% lower at 10,974.90 points. Mahindra and Mahindra (M&M) lost the most (down 6.46%) on the Sensex index, while financial stocks led by HDFC (down 6.22%), IndusInd Bank (down 4.94%), ICICI Bank (down 2.8%), Kotak Bank (down 2.6%), HDFC Bank (down 2.16%), and SBI (down 2.04%) took a hit.
“This turmoil which was triggered last week by the housing and NBFC’s continued to trouble the market as panic spread. In spite of assuring statements by key government and institutional leaders, the market was concerned about the near-term headwinds like quality & increased cost of funds along with tighter liquidity,” said Vinod Nair, Head of Research, Geojit Financial Services.
“At the same time, consolidation in emerging markets, continued increase in oil prices and high valuation further aggravated the anxiety,” Nair added.
We take a look at 5 key reasons that led to the plunge in Sensex and Nifty today:
Heavy sell-off across sectors: Heavy selling pressure was witnessed across all sectors — barring the IT and Teck (technology, media, and entertainment) sectors — led by realty, auto, banks, finance, telecom, industrials, and healthcare stocks. M&M, IndusInd Bank, HDFC, Bharti Airtel, Maruti Suzuki, Adani Ports, Asian Paints, Bharti Airtel, Tata Motors and Tata Steel were among the worst drags on the Sensex on Monday, while IT stocks TCS and Infosys rose by 4.5% and 1.5% respectively.
Weak rupee: The Indian rupee witnessed a weak session on Monday and depreciated 53 paise to an intra-day low of 72.7363 per US dollar. Forex dealers said a strong US dollar, along with heavy sell-off in the domestic stock market and higher crude oil prices, weighed on the rupee’s sentiment.
Absence of strong global cues: Most of the action was in currencies as financial markets in major Asian centers Japan, China, and South Korea were closed for a holiday, said a Reuters report. The US-China trade war remained in focus Monday, on reports that China had called off planned trade talks with the US in the wake of a new round of duties. European stock markets traded in the negative territory on Monday as fears of an escalating US-China trade row spread from Asian markets.
Crude oil at 4-year high: Oil prices jumped more than 2% to a four-year high on Monday after OPEC declined to announce an immediate increase in production despite calls by U.S. President Donald Trump for action to raise global supply, said a Reuters report. Benchmark Brent crude hit its highest since November 2014 at $80.94 per barrel, up $2.14 or 2.7%, before easing back to around $80.65 by 0915 GMT. U.S. light crude was $1.50 higher at $72.28.
Outflow of foreign funds: Weighed by widening current account deficit coupled with global trade tensions, overseas investors have pulled out a massive ₹15,365 crore ($2.1 billion) from the capital markets so far in September, said a recent PTI report. The latest outflow comes following a net infusion of close to ₹5,200 crore in the capital markets, both equity and debt, last month and ₹2,300 crore in July. During April-June, overseas investors had pulled out over ₹61,000 crore from the domestic market.