Country’s two biggest indices BSE Sensex and Nifty both crashed nearly by 4 per cent in a single trading session, the biggest fall since September 22, 2011. Sensex crashed over 769 points and closed at 18,598.18, while Nifty plummeted over 234 points to a low of 5,507.85.
All thirteen sector indices of the BSE closed in pressure with consumer durable index leading the fall as it crashed 8.38 per cent. Followed by real estate, metal and banking indices which fell by 6.07 per cent, 5.56 per cent and 5.55 per cent respectively.
Hero MotoCorp was the only share in Sensex that rose by 2.4 per cent while the rest 29 shares out of the 30 companies that comprise the index closed in the red. BHEl lost the most by 10.7 per cent. Sterlite Industries, GAIl and ONGC all fell over 6 per cent. On the broader index, out of the 50 shares, 47 shares closed weak.Overall, investor wealth worth Rs 2.2 lakh crore was wiped off from the markets. Volatility index, India Vix, rose by 26.42 per cent, highest since June 18, 2012. This indicated the sudden rise in panic and confusion among the investors over the near term view.
Biggest selling was seen in stocks with high FII stakes as the foreign investors took out their money in order to limit losses. FIIs hold 32.10 per cent stake in Unitech, which fell by 9.62 per cent. Other shares include Future Retail, JP Associates, Asian Paints and Reliance Infrastructure in which FIIs own 24.89 per cent, 23.77 per cent, 19.38 per cent and 14.95 per cent respectively.
Gaurang Shah, AVP, Geojit BNP Paribas said, “After a crash of 4 per cent, we expect the markets to see a small pull back. But going forward all eyes will be on rupee-dollar movement. From here, investors can pick up FMCG, information technology and pharmaceutical shares. As far as Reserve Bank monetary policy goes, we expect some changes.”
Explaining the mind of FIIs, Ambit Investment Adviors’s CEO, Andrew Holland said, “Foreign investors are worried about what new steps the Indian Government will take and because of this there is nervousness among them due to which they are taking their funds out of the markets. As far as rupee is concerned, we expect it to depreciate further more.”
The mood itself was gloomy even before the Indian markets opened. One of the biggest factors, which not only dented the Indian markets but triggered a panic selling right from the start was the fear that US Federal Reserve would begin winding down its massive bond buying program as early as by next month.
This fear not only caused havoc in Indian markets but also triggered heavy sell-offs in the US markets. Dow Jones fell nearly 1.5 per cent, the biggest percentage fall since June. Rupee further worsened the condition of the Indian markets as it breached 62 per dollar levels in the first of the session amid speculations that the US would soon reduce the stimulus.
The chain of events started after US labor Department announced the jobless claim data which showed that the new filings in US had dropped by 15000 to 320000, the lowest level since October 2007. While the jobless rate fell to a four and a half year low of 7.4 per cent. Along side this, consumer prices index rose in July by 0.2 per cent, pushing the annual inflation rate closer to the Fed’s target of 2 per cent. It was these positive numbers which indicate a recovery in the US economy and suggested that soon Fed will start rolling back its stimulus.