Amid fears over stricter norms on participatory notes (PNs) that may affect investments, the market headed with bearish move throughout the day and the benchmark BSE plunged by 551 points to an over 5-week low, thereby closing at 27,561.38 on Monday. Besides, the Chinese stock rout also added the woes to the market which forced to give a big jerk to the investors.
Nifty met with the same fate and also fell down by 161 points due to heavy selling all around as investors went around booking profits following a SIT report that Sebi should do more to identify end beneficial owners of P-Notes (PNs) and restrict their transfer.
PNs are a popular offshore derivative tool used by mostly overseas investors to invest in Indian stocks.
Massive selling in the stock market wiped out Rs1.50 lakh crore from total investor wealth at the BSE on Monday as sentiments turned bearish on worries that the stricter norms for P-Notes may hit foreign investments. Total investor wealth of BSE-listed companies plummeted by Rs1,50,994.8 crore to Rs1,02,62,579 crore.
Besides, a sharp 8 per cent decline in Chinese stocks on worries that their economy is heading for a sharp slowdown added to the sell-off in domestic equities.
Market players felt the move would hit investments in big way if the sentiments stay for longer. Other Asian markets did no better, which ended in the red due to worries that China is headed for a sharp slowdown despite the Government's efforts to revive it. The Shanghai Composite plunged as much as over 8 per cent.
"Markets were spooked by drastic fall in Shanghai. Drop in its industrial profit numbers for June seems to be the biggest factor to the fall in Chinese markets. This was complimented by a fall in PMI which came in at 48.2 for July," said Hiren Dhakan, Associate Fund manager, Bonanza Portfolio.
As far as P-Notes issue is concerned, both Finance Minister Arun Jaitley and Revenue Secretary Shaktikanta Das did some pep talk, saying the Government will consult all stakeholders on the recommendations of the Supreme Court-appointed SIT and it is still to take a call on the issue.
"No such step would be taken which could adversely impact investment sentiment in the country," Jaitley said.
Total turnover fell to Rs2,961.17 crore from Rs3,422.43 crore last Friday. "During these times when the global market is consolidating, India will have the advantage in the long term, especially as the domestic fiscal situation is improving and international commodity prices are supportive," said Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services.
Foreign portfolio investors (FPIs) were net buyers at Rs 6.62 crore on Friday, according to provisional exchange data. The market breadth remained negative as 1,751 stocks ended in the red, 1,070 finished in the green while 104 ruled steady.
Further weakness in the rupee against the dollar made things worse. Starting lower, the 30-share gauge broke below the crucial 28,000-level before ending at 27,561.38, down 550.93 points, or 1.96 per cent, its biggest single-day fall since June 2.
The NSE Nifty slipped below the 8,400-mark to settle at 8,361, down 160.55 points, or 1.88 per cent. Intra-day, it shuttled between 8,351.55 and 8,492.20.
Tata Steel lost most (5.17 per cent), followed by Hero MotoCorp. Of the 30-share Sensex pack, 29 ended lower. Only Bajaj Auto gained. Sectorally, shares of metal, capital goods, banking, power, realty, auto, oil and gas and IT all suffered losses.
Broader markets mid-cap and small-cap indices didn't escape the selling pressure, which closed lower 1.38 per cent and 1.07 per cent, respectively.
US stocks, too, edged lower last Friday after a report showed that sales of new single-family homes dropped to the slowest pace in seven months, suggesting that the housing market is still feeling the recovery pain.
Meanwhile, extending losses for the fourth trading session, the rupee on Tuesday fell by another 12 paise to close at a new 6-week low of 64.16 per dollar on persistent demand for the US currency from banks and importers amid a massive plunge in equities.
The rupee resumed lower at 64.07 per dollar as against last Friday's closing level of 64.04 at the Interbank Foreign Exchange (Forex) market and dropped further to 64.25 before finishing at 6-week low of 64.16, showing a loss of 12 paise or 0.19 per cent.
It has lost 61 paise, or 0.96 per cent, in the last four trading days.