On a day that was marked by a number of major happenings that included FM Arun Jaitley announcing a cut in petrol, diesel excise duties by Rs 2.50, resignation ICICI chief Chanda Kochhar and rupee crashing to yet another all-time low, Sensex tanked by as much as 806.47 points to close at 35,169.16 even as Nifty slumped by 259 points to 10,599.25.

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"Government has today announced a relief of Rs. 2.5/ltr on petrol and diesel to consumers. Central government will cut Rs. 1.5 in excise duty and remaining Re 1 will be borne by Oil marketing companies. Rough estimates suggest that Re 1 cut will hurt annual profit after tax of 19% for IOCL, 26% for BPCL and 27% of HPCL. Oil marketing companies stocks closed down sharply around 20%," said  VK Sharma, Head Private Client Group & Capital Market Strategy at HDFC Securities.

Earlier in the day, BSE benchmark Sensex plunged over 800 points today around 12.15 pm to trade at 35,170, but it had recovered about 200 points. The BSE 30-share barometer pared some losses and was trading at 616.15 points, or 1.71 per cent, lower at 35,359.48 at 1245 hrs. However, it resumed its precipitous fall thereafter. The Sensex today had opened down by over 400 points and quickly plunged further. Heavy selling based on macro factors like weakening rupee and rising crude oil prices has led to the carnage at Dalal Street.

The rupee plunged to a new low of 73.81 against the dollar, while the international benchmark Brent crude breached the US 86 per barrel level, nearing its four-year high.

A sharp plunge mainly in healthcare, IT, oil & gas, banking and auto pulled the Sensex lower by 806.47 points, or 2.24 per cent, to close at 35,169.16 points, extending losses for the second straight day. Intra-day, it hit a low of 35,022.12.

This is the lowest closing since July 2 when it had settled at 35,264.41. The gauge had lost 550.51 points Wednesday on worsening rupee woes coupled with surging crude oil prices and unabated foreign fund outflows.

The bloodbath on bourses was primarily triggered by continued slide in the rupee which hit yet another low of 73.81 (intra-day) against the dollar, brokers said.

The NSE Nifty index too fell 213.15 points, or 1.96 per cent, to 10,645.10. Volatility index India VIX also surged 6 per cent. 

All sectoral indices were trading in the red, with IT, auto, pharma, banking and realty stocks witnessing most losses.

Top laggards include Reliance Industries, Hero MotoCorp, TCS, IndusInd Bank, Adani Ports, HDFC Bank, Infosys, HUL, Asian Paints, HDFC and Bajaj Auto, falling up to 6 per cent.

While, Yes Bank was the top gainer, rising up to 2.18 per cent.

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Foreign portfolio investors (FPIs) bought shares worth a net of Rs 1,550 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 1,402 crore Wednesday.