S&P BSE Sensex dropped over 1300 points and Nifty erased a little under 24,500 mark today. This sudden fall erased investor wealth and dragged market sentiment down.
F&O market was impacted heavily today thus the primary reasons for the stock market plunge is multiple.
Global Market Weakness
US Federal Reserve’s hawkish signals led Asian and European markets to open on a negative note. Now that the rate cut has been postponed, foreign investors are pulling their money out of emerging markets like India. Also, the strong dollar is giving a double whammy to stocks all over the world.
FIIs Turn Net Sellers
The Foreign Institutional Investors (FIIs) have become highly aggressive sellers because of the global uncertainty and the increase in the US bond yields. As a result, the continuous outflows of the past week have increased the selling pressure on large-cap and banking stocks, thus spreading the market downturn.
Rising Crude Oil Prices
The decline in supply along with the unrest in the Middle East has led to a rise of Brent crude prices that are above $90/bbl mark once more. For India, which is a net oil-importing country, the higher price of crude oil will convert inflation into the main problem and also the weakness of the macroeconomic outlook will become more apparent, thus investors will tend to be cautious.
Profit Booking Post Rally
Bear markets were at the top of the curve recently while some of the investors decided to take profits.
Softening of China Property Market
According to the National Bureau of Statistics on , new home prices in China have not seen significant growth or decrease in 70 cities. In addition, transactions of new homes have dropped throughout the year till now. These rises in the supply of houses have been accompanied by decreasing prices, and this further deepens the crisis of real estate speculation. Except for only a few locations, there is a substantial decline in the prices of new resale houses across the vast majority of China even recently. Furthermore, in smaller cities and less developed areas, this depression in home
Sensex hit over 15000 points gained more than 700 points in the session on Tuesday riding on heavy buying mainly in banking, auto and consumer durable stocks for the third consecutive session. The rally was broad based with almost all sectors taking part and outperforming Nifty. The Indian stock market that tracks 30 of the largest and most actively traded stocks is at a new all-time high. On the other
Rupee Depreciation
The Indian rupee fell against the US dollar, going beyond 84 rupees. A lower rupee raises the cost of imports and can affect corporate margins, especially in sectors like oil & gas, aviation, and electronics — which were the top losers in today’s market.
Conclusion
Though today’s correction appears to be significant, experts describe it as the normal market cycle after a strong rally. But, FII outflows and global volatility that are still going on may make the near-term sentiment to be cautious.