Sensex slips 410 points; Nifty ends below 17,750: Top reasons behind the fall – Times of India
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NEW DELHI: After scaling to record highs for three straight sessions, equity indices plunged on Tuesday with the benchmark BSE sensex falling over 400 points amid weak cues from global markets.
The sensex plunged over 1,000 points to day’s low of 59,046. However, the 30-share index recovered near the closing time. It finally settled 410 points or 0.68 per cent to lower at 59,668.
Meanwhile, the broader NSE Nifty fell 106.5 points or 0.6 per cent to close at 17,749.
Top losers in the sensex pack included Bharti Airtel, Tech Mahindra, Bajaj Finance, Bajaj Finserv and HCL Tech with their shares falling over 3.68 per cent.
Whereas PowerGrid, NTPC, Sun Pharma, Titan and Kotak Bank were the top gainers rising up to 4.4 per cent.
On the NSE platform, sub-indices Nifty realty, IT and financial services fell as much as 3.02 per cent.
However, energy stocks were the high points of today’s trading session as the index rose more than 2 per cent to hit a record high, with Power Grid Corp climbing over 4 per cent to top both the indices.
Here are the top reasons for today’s fall:
* Large scale profit booking
The benchmark indices witnessed massive profit booking as global markets plunged amid concerns over Evergrande debt crisis, China power crunch, rising US bond yields and
Trading was volatile with the Nifty volatility index jumping 2.7 per cent.
Ajit Mishra, vice-president of Research at Religare Broking told news agency Reuters that volatility could continue as the festive and the earnings seasons kick in.
* Losses across sectors
Tech stocks dropped more than 2 per cent yet again after Monday’s 2.9 per cent slump. Tech Mahindra fell over 3 per cent to be among the biggest losers on the Nifty 50.
Telecom operator Bharti Airtel lost nearly 4 per cent and was the biggest loser on the benchmark index.
Private Banks dropped nearly 1 per cent after three consecutive sessions of gains, with IndusInd bank sliding 1.67 per cent.
Real estate stocks were the biggest losers falling over 3 per cent after five straight sessions of gains, with Oberoi Realty sliding more than 7 per cent to lead losses on the sub-index.
* Weak global cues
Global shares fell for a third successive day, while bond yields on both sides of the Atlantic soared on anxiety over when central banks might raise interest rates.
The 10-year US Treasury yield hit 1.5444 per cent, its highest level since June 17, pulling up euro zone bond yields in its wake. Two-year Treasury yields surged to 18-month highs.
Surging yields pressured high-growth technology shares at the start of trading in Europe while fresh signs of a slowdown in China’s economy also weighed on investor sentiment, pushing the pan-European 600 index down over 1 per cent.
Britain’s FTSE 100 index fell 0.5 per cent, while Germany’s DAX fell 0.8 per cent. France’s CAC 40 fell 1.1 per cent and Italy’s FTSE MIB index slipped 0.6 per cent.
“The global equity market is having difficulties rising in a wall of worries as the energy crunch and re-pricing of the US (and EU over the month) is potentially changing the timing and speed of future rate increases or at least tapering,” said Sebastien Galy, senior macro strategist at Nordea Asset Management told news agency Reuters.
US equities ended mostly lower in overnight sessions as selling pressure in the rate-sensitive technology sector led to contraction in S&P 500 and Nasdaq.
Meanwhile, Asian shares were mixed across regions as the fallout of Chinese property developer Evergrande’s debt crisis and a widening power shortage in China weighed on sentiment.
“Benchmark indices outperformed global markets in recent week as favourable Federal Open Market Committee (FOMC) meeting outcome and sustained recovery in key economic indicators bolstered investors’ confidence. However, investors remain on tenterhook with regards to progress on Evergrande,” Binod Modi Head-Strategy at Reliance Securities told news agency PTI.
* US debt ceiling
Besides, investors are also contemplating the prospect of rising US borrowing costs as inflation spikes, while US lawmakers’ struggle to raise the debt ceiling is also agitating nerves on trading floors.
With the US economy back on track — and several Federal Reserve officials saying their goals of sustained inflation and tackling unemployment are close to being met — the US central bank is expected to begin tapering its ultra-loose monetary policy within months.
The policy committee essentially signalled such a move at its meeting last week, while a closely watched guide to its interest rate plans suggested a rate hike could even come before the end of next year.
“Central bankers have set out how they want to ‘normalise’ monetary policy for some time. That process could start soon,” Chris Iggo of AXA Investment Managers said.
“The realisation of this has the potential to provoke some volatility in rates and equities.”
* Energy crunch in China
According to analysts, concerns that an energy crunch in China could hit growth in the world’s number two economy were adding to the downbeat mood, with Goldman Sachs lowering its outlook for this year.
Widening power shortages in China halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country’s manufacturing sector and associated supply chains.
At least 17 provinces and regions — accounting for 66 per cent of the country’s gross domestic product — have announced some form of power cuts in recent months, mainly targeting heavy industrial users, according to Bloomberg Intelligence.
* Evergrande crisis
Without making a reference to ailing developer Evergrande, China’s central bank vowed to protect consumers exposed to the housing market on Monday and injected more cash into the banking system.
Initial fears that the collapse of the embattled firm could spill into the global economy have eased. But there is still concern that if the issue is not handled properly the Chinese property sector, which accounts for a huge part of the economy, could take a massive hit.
The central bank’s comments come after a tightening of rules around the real estate sector by Beijing strangled firms’ ability to invest and construct buildings, a major reason for Evergrande’s woes.
* Higher crude oil prices
Brent crude oil hit $80 a barrel for the first time in three years, driven by regional economies beginning to reopen from the Covid-19 pandemic and supply concerns.
International crude oil prices have reached a nearly three-year high as global output disruptions have forced energy companies to draw more crude oil out of their stockpiles.
Accordingly, US crude oil inventory levels are also nearing a three-year low.
“Global demand for crude oil has been increasing consistently with the easing of pandemic restrictions and improving vaccination rates. On the supply side, Opec+ alliance has been slow in easing output restrictions, contributing to the tightened supply in the market,” a source told Reuters.
As per both IEA and Opec, global demand is expected to outpace supply due to which international oil prices will likely remain firm in the near to mid-term. A simultaneous rally in natural gas is also likely to drive demand for alternate fuels.
(With inputs from agencies)
The sensex plunged over 1,000 points to day’s low of 59,046. However, the 30-share index recovered near the closing time. It finally settled 410 points or 0.68 per cent to lower at 59,668.
Meanwhile, the broader NSE Nifty fell 106.5 points or 0.6 per cent to close at 17,749.
Top losers in the sensex pack included Bharti Airtel, Tech Mahindra, Bajaj Finance, Bajaj Finserv and HCL Tech with their shares falling over 3.68 per cent.
Whereas PowerGrid, NTPC, Sun Pharma, Titan and Kotak Bank were the top gainers rising up to 4.4 per cent.
On the NSE platform, sub-indices Nifty realty, IT and financial services fell as much as 3.02 per cent.
However, energy stocks were the high points of today’s trading session as the index rose more than 2 per cent to hit a record high, with Power Grid Corp climbing over 4 per cent to top both the indices.
Here are the top reasons for today’s fall:
* Large scale profit booking
The benchmark indices witnessed massive profit booking as global markets plunged amid concerns over Evergrande debt crisis, China power crunch, rising US bond yields and
Trading was volatile with the Nifty volatility index jumping 2.7 per cent.
Ajit Mishra, vice-president of Research at Religare Broking told news agency Reuters that volatility could continue as the festive and the earnings seasons kick in.
* Losses across sectors
Tech stocks dropped more than 2 per cent yet again after Monday’s 2.9 per cent slump. Tech Mahindra fell over 3 per cent to be among the biggest losers on the Nifty 50.
Telecom operator Bharti Airtel lost nearly 4 per cent and was the biggest loser on the benchmark index.
Private Banks dropped nearly 1 per cent after three consecutive sessions of gains, with IndusInd bank sliding 1.67 per cent.
Real estate stocks were the biggest losers falling over 3 per cent after five straight sessions of gains, with Oberoi Realty sliding more than 7 per cent to lead losses on the sub-index.
* Weak global cues
Global shares fell for a third successive day, while bond yields on both sides of the Atlantic soared on anxiety over when central banks might raise interest rates.
The 10-year US Treasury yield hit 1.5444 per cent, its highest level since June 17, pulling up euro zone bond yields in its wake. Two-year Treasury yields surged to 18-month highs.
Surging yields pressured high-growth technology shares at the start of trading in Europe while fresh signs of a slowdown in China’s economy also weighed on investor sentiment, pushing the pan-European 600 index down over 1 per cent.
Britain’s FTSE 100 index fell 0.5 per cent, while Germany’s DAX fell 0.8 per cent. France’s CAC 40 fell 1.1 per cent and Italy’s FTSE MIB index slipped 0.6 per cent.
“The global equity market is having difficulties rising in a wall of worries as the energy crunch and re-pricing of the US (and EU over the month) is potentially changing the timing and speed of future rate increases or at least tapering,” said Sebastien Galy, senior macro strategist at Nordea Asset Management told news agency Reuters.
US equities ended mostly lower in overnight sessions as selling pressure in the rate-sensitive technology sector led to contraction in S&P 500 and Nasdaq.
Meanwhile, Asian shares were mixed across regions as the fallout of Chinese property developer Evergrande’s debt crisis and a widening power shortage in China weighed on sentiment.
“Benchmark indices outperformed global markets in recent week as favourable Federal Open Market Committee (FOMC) meeting outcome and sustained recovery in key economic indicators bolstered investors’ confidence. However, investors remain on tenterhook with regards to progress on Evergrande,” Binod Modi Head-Strategy at Reliance Securities told news agency PTI.
* US debt ceiling
Besides, investors are also contemplating the prospect of rising US borrowing costs as inflation spikes, while US lawmakers’ struggle to raise the debt ceiling is also agitating nerves on trading floors.
With the US economy back on track — and several Federal Reserve officials saying their goals of sustained inflation and tackling unemployment are close to being met — the US central bank is expected to begin tapering its ultra-loose monetary policy within months.
The policy committee essentially signalled such a move at its meeting last week, while a closely watched guide to its interest rate plans suggested a rate hike could even come before the end of next year.
“Central bankers have set out how they want to ‘normalise’ monetary policy for some time. That process could start soon,” Chris Iggo of AXA Investment Managers said.
“The realisation of this has the potential to provoke some volatility in rates and equities.”
* Energy crunch in China
According to analysts, concerns that an energy crunch in China could hit growth in the world’s number two economy were adding to the downbeat mood, with Goldman Sachs lowering its outlook for this year.
Widening power shortages in China halted production at a number of factories including suppliers to Apple Inc and Tesla Inc and are expected to hit the country’s manufacturing sector and associated supply chains.
At least 17 provinces and regions — accounting for 66 per cent of the country’s gross domestic product — have announced some form of power cuts in recent months, mainly targeting heavy industrial users, according to Bloomberg Intelligence.
* Evergrande crisis
Without making a reference to ailing developer Evergrande, China’s central bank vowed to protect consumers exposed to the housing market on Monday and injected more cash into the banking system.
Initial fears that the collapse of the embattled firm could spill into the global economy have eased. But there is still concern that if the issue is not handled properly the Chinese property sector, which accounts for a huge part of the economy, could take a massive hit.
The central bank’s comments come after a tightening of rules around the real estate sector by Beijing strangled firms’ ability to invest and construct buildings, a major reason for Evergrande’s woes.
* Higher crude oil prices
Brent crude oil hit $80 a barrel for the first time in three years, driven by regional economies beginning to reopen from the Covid-19 pandemic and supply concerns.
International crude oil prices have reached a nearly three-year high as global output disruptions have forced energy companies to draw more crude oil out of their stockpiles.
Accordingly, US crude oil inventory levels are also nearing a three-year low.
“Global demand for crude oil has been increasing consistently with the easing of pandemic restrictions and improving vaccination rates. On the supply side, Opec+ alliance has been slow in easing output restrictions, contributing to the tightened supply in the market,” a source told Reuters.
As per both IEA and Opec, global demand is expected to outpace supply due to which international oil prices will likely remain firm in the near to mid-term. A simultaneous rally in natural gas is also likely to drive demand for alternate fuels.
(With inputs from agencies)
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