4 reasons why Sensex tanked 533 points from day's high
The Sensex dropped as much as 533 points from day high level of 33505.53, while it settled at 33,019, down 351.56 points from previous day's close. In the broader market, the BSE Midcap and the BSE Smallcap indices slipped 1 per cent each.
Sensex today: There appears no end to global trade war fears that were ignited once again as China hit back at Trump administration’s plan to slap tariffs on $50 billion in Chinese goods. Reacting to the development, the Sensex and Nifty defied the intraday positive momentum, slipping 1 per cent each. The Sensex dropped as much as 533 points from day high level of 33505.53, while it settled at 33,019, down 351.56 points from previous day's close. The broader Nifty dipped below its crucial 10,150 level, settling at 10,120 today. Back home, cautious sentiment ahead of the RBI policy outcome due on Thursday also contributed to the losses.
In the broader market, the BSE Midcap and the BSE Smallcap indices slipped 1 per cent each. Market breadth, indicating the overall health of the market turned negative. On the BSE, 1,191 stocks rallied, 1,442 stocks declined, while 151 stocks remained unchanged. Volatility index India VIX rallied 7.6 per cent to 16.29.
"Market slid nearly 2 per cent from day's high due to looming trade war tensions and caution ahead of RBI policy meet. Global market volatility continued to give a ripple effect to the market despite gradual recovery in domestic economy and moderation in inflation. RBI’s policy is likely to support near-term sentiment while clarity on earnings growth and monsoon will give more transparency in direction," said Vinod Nair, Head of Research, Geojit Financial Services.
We have compiled four reasons that pulled the markets lower:
1) Trade war fears re-ignite
China hit back on Wednesday at the Trump administration’s plan to slap tariffs on $50 billion in Chinese goods, retaliating with a list of similar duties on key US imports including soybeans, planes, cars, whiskey and chemicals. Beijing’s list of 25 percent additional tariffs on U.S. goods covers 106 items with a trade value matching the $50 billion targeted on Washington’s list, China’s commerce and finance ministries said. The effective date will depend on when the U.S. action takes effect.
The scale of China’s tariff targets was in line with Beijing’s pledge to mount a commensurate response, but it was released sooner than many observers had expected, adding to market fears that world’s two largest economies are spiraling towards a trade war that could shake the global economy.
2) Global markets under pressure
Heavy selling was seen in global stock markets and commodities, with US stock futures sliding 1.5 per cent, soybean futures plunging 3.7 per cent and the dollar briefly extending early losses. China’s yuan skidded in offshore trade. Asian markets tanked 2.5 per cent in futures trade, while European markets were trading with the losses of up to 1.25 per cent.
3) RBI policy outcome: No rate cut relief expected
RBI is unlikely to yield to the India Inc's pressure for a benign monetary policy stance by keeping policy rates unchanged in its first monetary policy review of 2018-19 to be announced on Thursday against the backdrop of hardening global crude oil prices. This would also be the first monetary policy announcement after the Budget, which has slightly deviated from the fiscal consolidation roadmap. The six-member Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel, will announce the policy outcome on Thursday.
4) Foreign investors on selling spree
Foreign portfolio investors have sold equities worth Rs 258 crore so far in April. Meanwhile, FPI investment in equities halved to Rs 26,000 crore in 2017-18 on fears of faster than expected rate hike by the US Federal Reserve and higher valuations of Indian equities. In comparison, overseas investors had put in Rs 55,700 crore in equities in 2016-17 after pulling out over Rs 14,000 crore in the preceding fiscal, data available with NSDL showed.
(With inputs from Reuters)