Sensex Falls 1,159 points, Nifty Crashes by 354 Points

Equity benchmark index Sensex crashed below 1,159 points on Thursday, 28 October 2021, following a strong selling by foreign funds combined with offloading by a few non-institutional investors.

Resultantly, traders fear that the flooding of IPOs in the coming weeks will prompt people to withdraw their money from listed stocks and invest in the initial public offerings.

Here’s more on this topic.

Indian Markets Deep in the Red

This was a second consecutive fall by the benchmark indices on the NSE and BSE. They ended nearly 2% down on Thursday. Here are a few highlights about this recent crash:

• The broader Nifty 50 crashed by 353.70 points to finish at 17,857.25
• S&P BSE Sensex fell by 1158.63 points to close below the level mark of 60,000 and reach 59,984.70.
• The top losers on the Bombay Stock Exchange (BSE) were Kotak Mahindra Bank, HDFC Bank, ICICI Bank, Infosys and Reliance Industries.
• On the other hand, IndusInd Bank, Larsen & Toubro (L&T) and Asian Paints were the major gainers.
• NSE sectoral indices settled in the red. Among them, Bank Nifty crashed 3.34% pulled down by Kotak Bank, IDFC First Bank and Punjab National Bank.
• Nifty FMCG also fell 1.89%, dragged by United Breweries and ITC.
• Nifty Metal plunged 3.44% because of a fall in Vedanta and Adani Enterprises.

According to data by the exchange, Foreign Portfolio Investors steered the sale with the net outflow of the day at Rs. 3,819 crores. Additionally, domestic equities saw a strong selloff with soaring volatility. This was hugely led by a clear correction in IT and heavyweight financials. This led towards a total wipe-out of around Rs. 4.5 lakh crores from investors’ wealth.

Meanwhile, other Asian indices too displayed weakness. Bourses in Tokyo, Shanghai, Hong Kong and Seoul finished with losses. European stock exchanges were also trading with loss during the mid-session deals.

Factors that Led to a Crash in Stock Markets on Thursday

Here are the major factors that made stock markets trade in red:

• Feeble global cues

On 28 October 2021, Asian stock markets witnessed heavy selling. This led to expanding crashes on Wall Street while investors anticipated a decision on monetary policy by the European Central Bank and Bank of Japan.

As a result, Nikkei finished down by 1% in Thursday’s session. The Shanghai Composite and Hang Seng also concluded down by 1.2% and 0.3%, respectively.

• Concerns over inflation

Amid expensive valuations, a slowdown in global growth and inflation is another concerning factor.

Although India’s central bank may have brought down the worries regarding inflation, price pressures could soon re-emerge. The central bank has put forth an inflation projection of 5.2% for the next financial year. However, consumer prices show trends of heating up by March quarter.

• Profit booking

Another leading factor behind this recent slump in Sensex was profit booking. The majority of profit booking was detected in the banking sector. Stocks of Adani Ports and ICICI Bank dragged the benchmark index down.

Bottom Line

Benchmark indices breaking psychological levels are a matter of concern for the Indian markets. However, it would be worth seeing how these factors develop in the coming weeks and their effect on the stock markets.

Frequently Asked Questions

1. What is RBI’s inflation forecast for the current FY?

RBI has brought down the inflation forecast by 5.3% for FY2021.

2. What was the outflow by FIIs on Wednesday?

FIIs sold Rs. 1.9 billion worth of shares on 27 October 2021, Wednesday.

3. How much did the international oil benchmark fall?

Brent Crude slipped to $82.94 a barrel, down by almost 1.11%.