The Indian stock markets become a part of global market sell-off with the BSE Sensex plunging by 484 points on Wednesday trade. Sensex on Wednesday registered its biggest fall over a month to settle below the 28,000-level as rout in Shanghai shares and fears of Greek’s eurozone exit rattled investors.
The NSE benchmark Nifty also crashed below 8,400-point mark as investors indulged in widespread selling, including in metal and auto shares.
A fresh weakness in the rupee against the US dollar also dampened the trading sentiment, equity brokers said.
What led to China markets fall
The Chinese markets fell initially tracking the global markets following Greeece crisis amid growth worries in China. The Chinese government took a series of steps since late June to stave off a crash in its stock markets, which plunged nearly 30 per cent over the previous three weeks since touching a peak on June 12, hit by tight liquidity conditions ahead of the quarter-end and uncertainty over the central bank’s easing policy.
Chinese regulators also took some steps that weakened the Chinese equity markets like stepping up supervision of over-the-counter margin financing.
According to Associated Press: Some 787 companies suspended trading on the exchanges in Shanghai and the southern city of Shenzhen by the end of trading Tuesday, according to China Business News. It said more requested a suspension later, raising the total to more than 1,000 — the equivalent of almost 36 percent of the total of 2,802 companies traded in Shanghai and Shenzhen.
We look at five crucial points that give an outlook about India amid China market crash
1. India has witnessed capital inflows and analysts are expecting a rise in inflows in the wake of the Chinese market crash as they are not ruling out a significant hike in fund allocation to emerging markets like India.
2. There are a lot of positives for the Indian market after the Chinese meltdown as oil prices and commodity prices have come down. Low crude prices may keep Indian inflation low which can make domestic market attractive for the foreign funds in the region.
3. Funds that are allocated for China will not immediately come to India but because of the the Greece and Chinese volatility, India’s pecking order in the emerging countries will improve over long term
4. Indian corporates quarterly results will be out soon. The market is expecting 10 per cent earnings growth on a year-on-year basis. A strong guidance for the rest of FY16 will be supportive to the Indian market.
5. Indian stock markets have been relatively stable over the last few months on account of increased domestic institutional participation. Market observers say that domestic investment is emerging as a counterbalancing force to FIIs — providing stability to Indian markets against volatility.
Stock brokers at the BSE react as the sensex declines by nearly 400 points in Mumbai on Wednesday, July 8, 2015 following China’s stock market plunge.
With agency inputs
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