The headline indices Sensex and Nifty plunged to its lowest level in FY20 on Thursday after US Fed's comments spooked global investors amid ongoing slowdown in the economy.
The headline indices Sensex and Nifty plunged to its lowest level in FY20 on Thursday after US Fed’s comments spooked global investors amid ongoing slowdown in the economy. The Sensex plunged 463 points or 1.23 per cent to end at 37,018.32 while a last-hour recovery helped the Nifty to close near the 11,000-mark. Notably, this is the lowest close for the 50-share index Nifty after March 1,2019. Sensex closed below the 37,000-mark for the first time since March 14, 2019. Shares of Vedanta took the biggest hit (5.55 per cent), followed by Tata Motors, SBI, Yes Bank, Bharti Airtel and Infosys, which lost up to 4.50 per cent. Maruti Suzuki, Power Grid, Reliance Industries, Bajaj Auto, Hero MotoCorp, HUL and NTPC ended in the green, gaining up to 1.86 per cent.
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According to technical analyst Milan Vaishnav, the markets have a two-fold reason for the decline. “The broader structure of the markets is very bearish, hence the extended decline. Sometimes, the markets do not respect key technical levels and continues to decline despite remaining oversold. The macro issues have continued to haunt the markets leading to FIIs selling in an unabated manner,” Milan Vaishnav, consulting Technical Analyst, Gemstone Equity Research & Advisory Services told Financial Express Online.
Decoding reasons behind the stock market plunge, Vivek Ranjan Misra, Head of Fundamental Research, Karvy Stock Broking said that global markets were expecting a more dovish Fed and are disappointed by “mid cycle adjustment” this has led to a rise in the dollar (DXY was at 2 year high which is not good for emerging market equities. Notably, while the US Federal Reserve reduced the benchmark lending rate by 25 basis points to 2.0-2.25 per cent on Wednesday, Chairman Jerome Powell said the move was not the beginning of a long series of rate cuts, sending global markets lower.
“For Indian equities, this is on top of the headwinds it has faced recently, like FII selling on account of tax proposals. There are other reasons as well, firstly the weakness in economy has not abated, as evident by the core sector data and auto sales,” Misra said. According to the expert, while some companies have reported good numbers, the vast number have been disappointing and commentary has not been encouraging.
Explaining the recovery witnessed in the last hour of trade, Vaishnav noted that weekly options expiry led to the volatility. “Options writing happened in a very structured way at 11,100, 11050 and 11,000 levels in a phased manner. This was also the reason that saw the short-covering as well from the lows of the day,” he said.
The mayhem in the market continues after the Sensex and Nifty registered their worst July in 17 years. The Sensex dropped 4.9% in the month hurt by disappointment with the country’s new budget, muted corporate earnings and the ongoing credit crunch. The benchmark index has performed better in August than July in only five years since 2002, data compiled by Bloomberg show.