Sensex drops 807 points on global worries to below 23K mark, but the econom is in a much better shape than the last time when the markets were at the current level
As the BSE Sensex lost 807.07 points, or 3.4%, to drop to 22951.83 on Thursday, investors ran for cover. The continuous fall in stock prices during last one week saw a massive erosion of Rs 5 lakh crore in market capitalisation.
Domestic bourses mirrored the weak sentiments in Asian markets – which open ahead of Indian markets – on concerns that global banks were weakening, adding to the woes of the global economic slowdown. Nikkei and Hang Seng fell over 1% in early trades. Both the indices closed 2.37% lower at 15,713.39 and 4% down at 18545.80, respectively.
NSE Nifty-50 ended 3.32% down, or 239.35 points, at 6976.35.
Dealers said the weakness was evident even in the US after the Federal Reserve chief Janet Yellen said that it would look at further increasing interest rates after a review of the global scenario.
This led to dollar strengthening against major currencies including the rupee.
"It's not just the case with Indian banks that are facing stress, it's the same scenario with banks across the globe," said a foreign fund manager.
Nifty fell below the May 12, 2014 level where it closed at 7014.25 after hitting a low of 6862.90.
Even amid the market mayhem, Indian markets still stands tall.
As compared to early May 2014, just before the NDA government was sworn in, when Sensex was at a similar level, most economic indicators today are at a much stronger level.
The forex reserves are at comfortable $349.15 billion as on January 29, 2016, up from $313.83 billion for the week ended May 9. Brent crude price has fallen from $108 a barrel in February 2014 (US dollar at Rs 61 versus current Rs 68.29) to the current $30.84 per barrel.
However, the rupee has dropped to 68-69 levels against US dollar, from a much comfortable 59-60 level in May 2014.
The data released by the Securities and Exchange Board of India (Sebi) on Thursday evening, however, showed the cash segment was marginally higher net-buy due to domestic institutional investor (DII) buying.
Foreign institutional investors sold Rs 1,112.66 crore in the cash segment against the DII buying of Rs 1,222 crore, the data showed.
"This implies that there was speculative selling in the market and there was a strong possibility of a pullback," said a dealer with a foreign fund.
A few fund managers have ruled out any major pullback and expect the downtrend to continue for a while.
"Though India is better as against the rest of the world, problems related to crude oil weakness, defaults by countries like Venezuela has raised concerns of the economic stability of similar countries," said Vijay Singhania, founder director of Trade Smart Online.
"Selling pressure from foreign funds continues, and they have sold a net $1.9 billion in Indian shares so far this year," Singhania said.
Most said that the Yellen view on Fed rates were realistic and the US markets could face some turmoil if rates were hiked in the near future.
"We are not expecting a solid recovery but a small technical bounceback of 150-200 points in Nifty is likely before another round of selling begins. We believe that till Budget the market is firmly in bear grip and thereafter a lot will depend on the budget announcements," said Singhania.
Of the 50 stocks on the Nifty, three gained and 47 were in the red. Major loses were Vedanta (7.36%), Tata Motors (6.95%), Bhel (6.72%), Adani Ports (6.33%) and ONGC (5.64%).
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