Punching holes in Nifty’s decoupling theory that was doing the rounds till a few days ago, the domestic equity market on Monday tumbled for the fourth day in a row as the global macro construct remained unfavourable. Sensex tumbled over 1000 points intraday while Nifty slipped below the 17,000 mark. Read here reasons of Stock Market Crash.
After today’s market crash, investors became poorer by around Rs 7 lakh crore as the market capitalisation of all BSE-listed companies dropped to Rs 269.86 lakh crore.
“Although India is seen as a bright spot in times of global slowdown concerns, domestic markets will not be completely insulated from overseas turmoil and would continue to see bouts of intra-day volatility,” said Prashanth Tapse of Mehta Equities.
Here are the 9 key factors making traders nervous on Monday.
Reasons for the Market Crash
Oil prices jumped more than 4% as OPEC+ said it would consider reducing output to more than 1 million barrels per day to buttress prices with what would be its biggest cut since the start of the Covid-19 pandemic.
Pressure On Rupee
The Indian rupee was under pressure as the domestic currency was trading 0.67% lower at 81.89 against the US dollar. Although a depreciating rupee is positive for exporters, it makes our imports costlier.
Fear around Powell’s next hike
Although US Fed’s 75bps rate hike was anticipated but the sustained aggressive stance indicating 125 bps hikes in the next two policy meetings by December 2022 has spooked the market. “A hard landing is becoming the base case scenario for many and that means more economic pain along with a much weaker stock market is coming,” said Edward Moya, Senior Market Analyst, OANDA.
Amid the flight to safety of the US dollar in turbulent times, the US dollar index continued to rally and was around the 114-mark. The Indian rupee, as a result, hit a fresh all-time low of 81.55 against the greenback. A depreciating rupee makes India less attractive for foreign investors.
Due to the sharp rise in US bond yields, Indian bond yields have also moved up sharply with 2-year bond yields moving to a 3-year high. India’s 10-year benchmark govt bond yield was at 7.4173%.
US 2-year bond yield was up 1.3 per cent at around 4.26 while the benchmark 10-year Treasury stood at around 3.75, its highest level since 2010.
Indian markets were tracking global peers, with the European STOXX 600 index down 1.4%. London’s FTSE-100 stock index was down 1%, falling in line with other markets.
In other Asian markets, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1% to a two-year low. It is heading for a monthly loss of 11%, the largest since March 2020. Japan’s Nikkei fell 2.2%.
The rise in bond yields and rupee depreciation is making foreign institutional investors or FIIs pull out money from Dalal Street. FIIs sold Indian equities worth around Rs 2,900 crore last Friday. Last month, FIIs were net sellers to the tune of Rs 7,624 crore, according to NSDL data.
Despite positive macros including India’s decoupled economy, pickup in credit growth and tax collection, India remains one of the most expensive stock markets in the world.
Nifty’s support was seen at 17,166, a breach of which in the morning led to a sharper fall. Analysts said 17,490 could be the resistance for Nifty in the near term. On Friday, the index had formed a long bearish candle on the charts which is broadly negative.
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