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Indian Share Market: Sensex crashes 1158 pts, Falls 468.05 pts

26 August 20226 mins read by Angel One
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On Monday, 24 January 2022, the Indian stock market benchmarks- Sensex and Nifty 50 continued to slip for the fifth straight session. All Asian stock markets plunged amid weak global cues as investors braced themselves for a Federal Reserve meeting expected to confirm monetary withdrawal from global stock markets.

Sensex crashed by 2000 points intraday but slightly recovered to close at a loss of 1546 points at 57,491.51. Nifty 50 plunged 486 points to 17,149.10, down 2.6%. In the last five sessions, both Nifty and Sensex have dropped over 6%.

Now let us take a deeper dive into the recent stock market crash.

Reasons behind Monday’s Stock Market Crash

The US Federal Reserve intends to end its pandemic-era policy of high liquidity. It will end its policy of bond purchases and hike interest rates 3-4 times to cope with rising inflation. Policymakers at the Fed will lay the groundwork for an interest rate hike in their upcoming meeting in January 2022.

For Indian companies, this will cause an end to the easy availability and low cost of overseas funds. It has led to massive outflows from the Indian equity market as foreign investors pulled out their funds. Foreign Portfolio Investors (FPIs) have sold $1.7 billion worth of Indian stocks, leading to an outflow of $5 billion in the previous three months.

Besides expectations of a Fed rate hike, geopolitical tensions, rising crude oil prices and weakening of the rupee have all contributed towards Monday’s stock market crash. Geopolitical tensions between Ukraine and Russia, one of the world’s largest oil producers, may lead to a further surge in oil prices.

Other factors impacting Indian stock markets include the strengthening of the dollar, with the local currency losing 14 paise against it. Moreover, Fed’s hawkish sentiments have hurt equity market sentiments, leading to increased market volatility. A possible interest rate hike in India to prevent further FPI outflows may also hurt Indian companies.

Details of Monday’s Stock Market Plunge

On Monday, NSE Nifty plunged 3.38%, or 596 points to 17,021 and BSE Sensex slumped 3.31% or 1955 points to 57,082 as of 2:16 PM. With Nifty Midcap 100 index trading 3.37% lower and small-cap index falling 4.20%, mid-cap and small-cap shares in India were in the negative.

As a result, all Indian stocks lost value wiping out investors’ wealth to the tune of Rs. 9.14 lakh crores. The heavyweight Reliance Industries led the fall in stock prices, followed by Infosys and HDFC Bank. In total, these stocks contributed to a third of Sensex’s fall.

Bajaj Finserv was the top Nifty loser cracking 6.22% to Rs. 6,915. Tech Mahindra, Tata Steel, JSW Steel and Wipro followed suit. The newly listed Paytm and Zomato shares fell to their lowest levels since listing at 5.64% and 18.48%, respectively.

Meanwhile, all sectoral indices ended in the red on the BSE, with metals, consumer durables and realty leading the fall. At closing, the combined market cap of all listed companies on the BSE stood at Rs. 260.52 lakh crores.

The overall market was at its worst since 23 March 2020, with only 187 stocks on the rise against 2014 in the red on NSE. On the 30-share BSE, 456 stocks were advancing compared to 3069 declining shares. The sell-off was broad-based, with both NSE and BSE wiping any gains posted in 2022. In contrast, the volatility index NSE India VIX increased by 20.84%.

As of 1:26 PM 25 January 2022, BSE Sensex fell by 142.69 points to 57,348. In contrast, NSE Nifty 50 has stabilised to 17,153, up 0.02% or 3.95 points.

Parting Thoughts

Intense selling pressure, fund outflows, rising crude oil prices, forthcoming Union Budget and possible Fed rate hikes led to intense pressure on India’s equity market on Monday. Unfortunately, none of these economic pressures shows any sign of disappearing.

The US Federal Reserve will likely move quickly to hike interest rates to combat inflation. As bond prices and interest rates increase, riskier assets like equities usually become less attractive. As such, many experts are of the opinion that markets will likely continue their sluggish trend.

Source: NDTV

Frequently Asked Questions

  1. Why have foreign investors pulled money out of India’s stock markets?
    As the US Federal Reserve announced its proposal to hike interest rates, riskier assets like emerging market equities became less attractive for foreign investors. That is why investors have pulled their funds to avoid losses.
  1. What was the state of Wall Street after Monday’s stock market crash?
    Wall Street went plunged on Monday with all sectors in the red, led by tech stocks. The Nasdaq Composite dropped 2.09% or 287.43 points to 13,481.50, while S&P 500 opened at 4356.32, lower 0.95% or 41.62 points. The Dow Jones Industrial Average fell 0.57% or 194.76 points, opening at 34,070.61.
  1. How did gold prices perform after Monday’s stock market crash?
    Gold prices jumped to Rs. 48,431 per 10 grams, an increase of Rs. 255. Rupee depreciation and strong global trends for this precious metal led to price appreciation.
  1. What are the investor strategies in the current market?
    With no signs of the end of market weakness, many experts have recommended a highly cautious approach to investment. One may want to keep exposure at moderate levels and avoid making aggressive purchases or shorts as a clear directional bias has not yet been established.

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.

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