With external factors ranging from Chinese equity markets sell-off to Saudi Arabia-Iran geo-political stand-off, domestic markets on Monday collapsed like a pack of cards as the Sensex crashed below the 26,000-mark by sinking almost 538 points - the worst ever fall in more than three months on the second-day trading session of the calendar year 2016.
Amid heavy sell-off, the total market capitalisation crashed below the Rs 100 lakh crore-mark, especially the BSE listed mid-cap firms, which are the most hit, wiping out nearly Rs 1.54-lakh crore from the investors’ wealth. The rupee on Monday also plunged to a two-week low of 66.61 by falling 47 paise against the US dollar on heavy demand for the American currency from importers and banks largely impacted by global economic and political headwinds.
As the BSE 30-share Sensex remained in the negative zone, the yellow metal, however, shone on its safe-haven appeal on Middle-East tension. The total investor wealth, measured in terms of collective value of all listed stocks, fell to Rs 99,39,378 lakh crore, down from Rs 100.93 lakh crore at the end of last trading session on Friday. The BSE 30-share Sensex remained in the negative zone throughout the trading session and settled 537.55 points or 2.05 per cent down at 25,623.35, its weakest closing since September 22.
Markets expert believe that slump in the Chinese economy is one of the root causes that impacts all the emerging markets. “The slump in the Chinese economy is expanding further which is impacting all the emerging markets. It is not a good start for the Indian market, which was hoping in expectation that FIIs will return post the holiday season. Volatility is likely to continue till we see stability in the Chinese economy and domestic cues like budget wish-list and Government’s reforms agenda,” said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services.
Also the selling activity was further accelerated due to the domestic manufacturing sector output which shrank to a 28-month low in December and fresh weakness in the rupee as well.
Other Asian stocks, which opened after a long break, were at the receiving end after a private survey showed Chinese factory data contracted for a fifth straight month. Consequently, Shanghai index plunged by more than 7 per cent and trading was halted for the rest of the day.
Besides, a flare up in the Middle-East after Saudi Arabia cut diplomatic ties with Iran following a row over Riyadh’s execution of a Shiite cleric also had its negative impact.
Global crude prices also surged by 1.64 per cent to $37.89 per barrel while in the local market, rupee weakened by 45 paise to 66.59 intra-day against the dollar.
Moreover, the NSE Nifty fell also below the 7,800-mark by losing 171.90 points or 2.16 per cent to 7,791.30 after hovering between 7,937.55 and 7,781.10. The index had last logged its biggest single-day fall of 185.45 points on September 1. Across the board selling was led by telecom, banks, industrials, energy, capital Goods and healthcare stocks.
In all, 27 scrips out of the 30-share Sensex pack ended negative, while only Wipro, HUl and Asian Paints managed to keep head above water.