Concerned over huge sell-off by foreign institutional investors (FIIs) and various Government reforms, including goods and service tax (GST), Stock markets witnessed carnage on Wednesday, shedding nearly 723 points. This is the biggest single-day fall in last four months after 855 points plunge on January 6. Besides, this is the second-biggest since Modi government took over on May 26, 2014.
Meanwhile the rupee depreciated by 10 paise to close at 63.54 against the dollar due to surge in global crude prices. Across-the-board sell-off was triggered by the concerns that reform process may get delayed as the key GST bill faces strong political opposition even as it got through lok Sabha. Slowdown in the services and manufacturing sectors as also persistent taxation worries added to the pressure.
“Traders remained concerned due to prevailing conflict between the opposition and Government over key bills in the Parliament,” said Jayant Manglik, President of Retail distribution at Religare Securities. After opening a shade higher at 27,473.36, the 30-indices Sensex advanced to a high of 27,501.15. However, it succumbed to selling pressure and dipped below the 27,000-mark with blue-chip stocks ICICI Bank, ONGC, Cipla and ITC, among other plummeting. It touched a low of 26,677.64 before settling 722.77 points or 2.63 per cent lower at 26,717.37, the lowest in nearly 5 months.
Meanwhile, in the currency markets, the rupee lost another 10 paise to close at 1-week low of 63.54 against the US dollar following distinctly weak trend in local equities amid sustained capital outflows. “Sustained dollar demand from banks and importers amid a steep fall in local equities also weighed on the rupee value,” said analysts. Globally, Brent crude for June delivery rose 63 cents to $68.15 per barrel in afternoon trade.
Forex dealers said continued dollar demand from importers, mainly oil refiners, on the back of smart surge in brent crude oil prices too weighed on the rupee but a sharp fall in the Greenback overseas capped the rupee's losses. At the Interbank Foreign Exchange (Forex) market, the domestic unit commenced higher at 63.34 per dollar from its previous close of 63.44 and immediately touched a high of 63.30.
The 50-share NSE Nifty also saw the similar fate, crashing by 227.80 points or 2.74 per cent to close below 8,100-mark at 8,097. On expectations of speedy reforms promised, the Sensex was on an upward spiral for over nine months and soared to an all-time high of over 30,000 points early in March this year. However, it has lost over 3,300 points from its peak, wiping out more than half of the gains made since the change in government. “The Sensex has lost nearly 2,400 points (over 8 per cent) in the last three weeks primarily on account of the concerns pertaining to the FIIs taxation (MAT) issue, the nervousness surrounding the March quarter earnings season, which has failed to surprise on the upside as yet and the possibility of a second consecutive year of weak monsoon,” said Hitesh Agrawal, Head of Research at Reliance Securities.
Traders said panic offloading at algo trading platforms added to the sell-off pressure. They added that in today's case, a breach of the 200-day average (considered a strong support for Nifty) sparked strong selling on algo platforms. “Strong selling on algorithmic trading platforms and constant selling by foreign investors on ongoing worries about retrospective taxes forced indices to close at the lowest level in 2015,” said Jignesh Chaudhary, Head of Research at Veracity Broking Services.
Out of 30 Sensex stocks, 29 ended with loses, while only Bharti Airtel ended with gains. BHEl was biggest loser on the index with a fall of 6.21 per cent, followed by ICICI Bank 4.95 per cent, l&T 4.68 per cent, Maruti Suzuki 4.20 per cent, NTPC 4.09 per cent, Cipla 3.96 per cent, ONGC 3.96 per cent, Axis Bank 3.88 per cent and Tata Power 3.74 per cent.