Sensex Crash Today: Rs 4 Lakh Crore Investor Wealth Wiped Out – Key Factors Behind Sensex Crash Today

NEW DELHI: In another disappointing week for D-Street investors, benchmark indices fell more than 1.5 percent on Friday with Nifty closing below 16,500 on concerns about interest rate hikes.

At the close, the Sensex was down 866.65 points, or 1.56 percent, at 54,835.58, and the Nifty was down 271.40 points, or 1.63 percent, at 16,411.30. This is the worst week in over five months for Sensex and Nifty since the week ending November 26, 2021.

Domestic shares lost almost Rs 4 lakh crore in value, led by strong selling across the board.

“A sharp drop in US equities as the market assessed the need for further rate hikes to rein in elevated levels of inflation hurt global markets with heavy selling,” Vinod Nair, head of research at Geojit Financial Services.

The market weakness was such that six shares fell for every share rose.

The Bank of England, while raising its interest rates, warned of a possible risk of recession, aggravating investors’ fears. This period of volatility is the time for the smart money to look for buy-in-dip opportunities as a strategy with a focus on sectors expected to be less affected by inflation and rising yields, Nair added.

For the week, equity benchmarks fell 4%. This is also the fourth consecutive week of decline for the two measures. The breadth of the market was skewed in favor of the bears. Some 838 shares advanced, 2,516 fell and 106 remained unchanged.

Infosys, the HDFC twins that contribute the most to the decline of Sensex. Bajaj twins, Axis Bank, Nestle, Wipro, Divis Lab, Shree Cement and UPL were the biggest losers today, while Hero MotoCorp, Tech Mahindra, Power Grid Corp, ITC, SBI and ONGC managed to settle with profits.

All NSE sector indices closed deep in the red, with banks, IT and metal bonds the biggest drags on both benchmarks. The broader markets also bled to death with mid-cap and small-cap Niftys down about two percent each.

Here are some factors weighing on the market:

On Thursday, the Bank of England warned that the UK economy could contract in 2023 and projected inflation of more than 10 percent as it raised interest rates by a quarter basis point.

A day earlier, the US Federal Reserve had raised its policy rate by 50 basis points, the highest in 22 years, even as US GDP shrank 1.4 percent in the quarter. March. In India too, the RBI increased the policy rate by 40 basis points, along with an increase in the cash reserve ratio.

Oil prices rose for the third straight session on Friday, shrugging off concerns about global economic growth, as concerns about tight supplies underpinned prices ahead of a looming European Union embargo on Russian oil.

On Thursday, OPEC+ agreed only a modest monthly increase in oil output, arguing the producer group could not be blamed for Russian supply disruptions and saying China’s coronavirus lockdowns threatened demand prospects.

  • Weak US economic readings

Data releases from the US suggest initial jobless claims rose as high as 200,000 last week amid continued tight labor markets. May is the eighth consecutive month that foreign investors are net sellers of domestic stocks. This is even as monthly outflows have fallen from a recent peak of Rs 41,123 crore in March.

A rise in interest rates in the US is pushing the dollar higher. The US dollar and risky assets such as emerging market stocks have an inverse relationship. The data showed that the institutional class is a net seller to the tune of Rs 4,857 crore in May so far.

Investors were also eagerly awaiting earnings from market heavyweight Reliance Industries.

“The stock has had an outstanding performance in the last 12 months; valuations of 18 times FY24 PE, 10.5 times EV/Ebitda and 1.8 times P/BV factor to the upside, with short-term stress on return indices due to higher-than-estimated capital allocations/inherent challenges in scaling new power plans, making us cautious about material upside in this case,” ICICI Securities said in a May 5 note.

In addition, there was concern that investors might take money from the secondary market to subscribe to LIC’s initial public offering. The 20,557 crore issue was already 103 per cent subscribed at the end of its second day, with the employee and policyholder categories receiving double and triple bids compared to reserved shares.

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