Market Crash: Why Sensex plunged over 900 pts, Nifty fell below 24,500

In a volatile session on Tuesday, the BSE Sensex crashed up to 1002 points or 1.23 per cent to 80,433 levels, while NSE’s Nifty50 fell 336 points or 1.35 per cent at 24,445.80 levels in intraday deals. 

At close, the Sensex tanked 930 points or 1.15 per cent at 80,220.72, whereas the NSE’s Nifty50 slumped 308.96 points or 1.25 per cent to 24,472.10 level.

The benchmarks retreated amid continued weakness exhibited by the bourses, on account of foreign institutional investors selling Indian equities for cheaper markets in China and Hong Kong. The bourses were also under pressure from the quarterly earnings of which have been underwhelming till now. 

 

The index heavyweights that pulled the BSE Sensex down on Tuesday in terms of contribution included Reliance Industries, Mahindra and Mahindra (M&M), Larsen and Toubro, State Bank of India and HDFC Bank among others.  Among these, M&M fell the sharpest and was the top loser on the BSE Sensex, plummeting up to 3 per cent in intraday deals. Otherwise, a total of 27 out of 30 stocks ended in losses on BSE Sensex on Tuesday.

Among sectoral trends, all sectors were trading in red, with Nifty Realty slipping the second lowest (down 3.61 per cent) after Nifty PSU Bank that up to 4 per cent intraday. Stocks of PSU banks such as PNB, Maharashtra Bank, Central Bank, UCO Bank, Canara Bank and Punjab and Sind Bank fell in the range of 5-6 per cent each intraday. 

Other sectors including Nifty Metal, Nifty Consumer Durables, Nifty Auto, Nifty Media and Nifty Oil and Gas also fell between 2-3 per cent intraday. 

The broader markets were bleeding heavier than benchmarks, with the BSE SmallCap index falling 3.71 per cent at 53580.91 level intraday. The BSE MidCap index on the other hand slumped by 2.52 per cent at 45,975.21 intraday.

"When market valuations are at elevated levels some triggers will cause corrections, making the valuations reasonable and in tune with long-term averages. This time the trigger for the correction has come from the sustained selling by FIIs which has reached Rs 88244 crores by 21st October, according to NSDL,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Vijayakumar added the record high FIIs selling figure has not impacted the market much due countervailing action of sustained DII buying with market valuations still higher than the historical averages. Although large cap valuations can be justified by their long-term growth prospects, he said. 

"Bearish sentiment continued to dominate the domestic market today amid heightened volatility, with small and midcap stocks taking the biggest hit. The recent sharp rise in US bond yields signals diminished expectations for aggressive rate cuts by the US Fed, also affecting fund flows to EMs. In the short term, this bearish outlook may persist due to sluggish earnings growth trends," said Vinod Nair, head of research at Geojit Financial Services.

Technical View

According to technical analysts, the lack of momentum post downside break of 24,770 suggests that the 24470-23900 view may take a while to mature. 

“Towards this end, should we push back above 24800, we would be inclined to consider it as a fresh onset of buying interest, and aim for 25350/90 again,” Anand James, chief market strategist, Geojit Financial Services. 

Global markets

Except for China and Hong Kong, markets mostly corrected on Tuesday in the Asia-Pacific region with Japan’s Nikkie falling 1.39 per cent, and broad based Topix slipping 1.06 per cent. 

South Korea’s Kospi also slumped 1.31 per cent, while Australia’s ASX/200 was down 1.66 per cent. 

In contrast, Mainland China's CSI 300 rose 0.57 per cent. In Hong Kong, the Hang Seng index increased by 0.10 per cent.