India’s benchmark index Sensex plunged as many as 453 points on Thursday. The key equity indices took a heavy blow today led by a number of factors that triggered one after the other. First of all, the fear among the investors due to uncertainty over the Q2 GDP growth numbers which are scheduled for later today. Indian stock markets traded 300 points down till afternoon session and recovered a bit also, as at 2:27 pm, BSE Sensex pared off partial losses, making an intraday recovery level of 33,438. But soon after India’s government budget value was announced Sensex went on to fall. The benchmark Sensex lost 453.41 points or 1.35% to end at 33,149.35 while it tripped 494.04 points to hit the day’s low of 33108.72.
Take a look at 5 reasons which led Sensex to lose 453 points today.
Widening in fiscal deficit
The Centre’s fiscal deficit during the first seven months (April-October) of the current fiscal was Rs 5.25 lakh crore, or 96.1% of the budgeted target for the current fiscal year that ends in March 2018, higher than Rs 4.99 lakh crore till the previous month. The country’s fiscal deficit for the April-October period is just a little shy of Rs 5.47 lakh crore that the government has budgeted for the entire year.
The deficit was 79.3% of the full-year target during the same period a year ago. The net tax receipts in the first seven months the fiscal year were Rs 6.34 lakh crore, government data showed on Thursday. The government aims to restrict the deficit to 3.2% of GDP in the current fiscal as against 3.5% in 2016-17. In absolute terms, 3.2% deficit for the current fiscal works out to nearly Rs 5.47 crore.
Caution over Q2 GDP
India is all set to announce the July-September GDP growth rate today at 5.30 pm today. The second quarter GDP growth rate is going to record the impact of the Goods and Services Tax on the economy for the first time since its implementation. It is being estimated that India will embark upon an upward growth after 5-quarters of slowdown, especially after hitting a 3-year low to 5.7% in the previous quarter due to self-imposed note ban and massive destocking ahead of an ambitious switch to the GST regime.
Economists say the scenario has improved since then, the GDP growth is expected to rebound — between 6.2% and 6.6%. The Reuters poll of 52 economists has estimated the GDP growth at 6.4% from a year ago. If the GDP data matches estimates, it will break a five-quarter slowing trend and mark the best rate this calendar year.
It is observed past that the last Thursday of every month — expiry of derivative contracts — steer down the momentum of markets up to a little extent, today it coupled with other factors too. The settlement of November F&O series brought the investor sentiments down. The offloading of positions by participants as today being the last trading session of November series contracts in the derivatives segment pulled down the index.
North Korea fears
From yesterday, Indian stock markets came under pressure after North Korea fired its most powerful missile. Yesterday, Sensex and Nifty ended dull in a range bound trading activity as gloomy cloud feared investors. Earlier on Wednesday, North Korea announced that they were successful in test launch of the intercontinental ballistic missile (ICBM). Stock markets around the world held back as experts expected that North Korea will continue with its weapons program. About after 2 months of silence and peace, North Korea launched a much powerful missile. “The missile was launched from Sain Ni, North Korea, and travelled about 1000 km before splashing down in the Sea of Japan, within Japan’s Economic Exclusion Zone (EEZ),” Associated Press said in a report.
Selloff in heavyweight stocks
With all the above factors weighing on the stock markets, in order to book partial profits ahead of uncertainty over GDP data, a heavy selloff pattern was noticed in the blue-chip stocks. Since today morning, markets witnessed heavy selling, later it got spiked after the government’s budget value was announced. The stocks of heavyweight companies ended lower on Sensex today are Kotak Mahindra Bank (down 2.63%), State Bank of India (down 2.54%), Reliance Industries (down 2.42%), Axis Bank (down 2.39%), Tata Motors (down 2.32%), ICICI Bank (down 2.3%), Wipro (down 2.05%), Tata Steel (down 1.99%), HDFC (down 1.47%), ITC (down 0.97%), TCS (down 0.91%), Infosys (down 0.85%), Maruti Suzuki (down 0.77%) while HDFC Bank and Hindustan Unilever dropped 0.73% each. The stocks of Reliance Industries, ICICI Bank, HDFC, Kotak Mahindra Bank, State Bank of India, HDFC Bank, Axis Bank, ITC, Tata Motors, Infosys and TCS. Collectively these 11 stocks alone washed off 360 points.