 "Here's why Sensex tanked over 900 points in Wednesday's intra-day trade")
Bears tightened their grip on domestic markets in Wednesday's intra-day trade, as global sentiments turned sour post Fitch credit rating downgrade of the US.
Benchmark indices the S&P BSE Sensex tumbled 983 points or 1.4 per cent to hit day's low of 65,476, whereas Nifty50 lost 295 points or 1.4 per cent to day's low of 19,517 levels.
Broader markets, too, exhibited weak trends as Nifty Midcap 100 and Nifty Smallcap 100 indices slipped up to 1 per cent.
All sectors, meanwhile, nosedived in the sea of red, with Nifty Metal, Nifty PSU Bank, and Nifty Oil & Gas emerging as some of the worst performers.
However, analysts expect this downtrend to be short-lived.
"The downgrade of the US credit rating by a notch is sentiment negative for global markets. The US 10-year bond yield spiking above 4 per cent and the dollar index rising to 102 are near-term negative for emerging markets. But it is important to note that the downgrade doesn’t say anything that the market doesn’t know. So, the negative knee jerk reaction is likely to be short lived," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"The downgrade of the US credit rating by a notch is sentiment negative for global markets. The US 10-year bond yield spiking above 4 per cent and the dollar index rising to 102 are near-term negative for emerging markets. But it is important to note that the downgrade doesn’t say anything that the market doesn’t know. So, the negative knee jerk reaction is likely to be short lived," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Meanwhile, here are top 3 reasons why markets crashed in Wednesday's intra-day trade:
Fitch downgrades US credit rating: Overnight, the US markets largely closed on a soft note after Fitch downgraded credit rating to AA+ from AAA. Major averages Dow Jones ended flat, while the S&P 500 and NASDAQ Composite indices slipped up to 0.4 per cent.
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As investors use credit ratings to understand how risky it is to lend money to a government, Fitch said that the downgrade reflected "expected fiscal deterioration over the next three years and growing government debt burden."
The muted sentiment, then spread to markets in Asia-Pacific in Wednesday's early deals. Key indices Nikkei 225, Topix, Kospi, S&P 200, and Hang Seng indices fell in the range of 1 per cent-2 per cent.
Moderation in foreign flows: After five months of consecutive buying, foreign portfolio investors (FPIs) started August on a negative note towards Indian equities. FPIs offloaded equities worth Rs 774 crore on August 1, 2023.
Boiling oil prices: A weekly drop in oil inventories coupled with expected production cuts from Saudi Arabia sent crude prices to a three-month high. Both Brent Crude and WTI Crude jumped 1 per cent each to $85 per barrel and $82 per barrel, respectively.
According to American Petroleum Institute (API) report, US oil inventories dropped 15.4 million barrels ending July 28, surpassing analysts' estimate of 1.37 million barrel decrease.