Sensex tumbles by 538 points, worst 1 day loss in 16 months

Market benchmark BSE Sensex on Tuesday plunged by 538 points to register its worst single day loss in 16 months and close below 27,000-mark as foreign investors, already confounded ahead of a crucial US Fed meeting, were spooked by a rate hike in Russia amid sinking oil prices.

Traders said domestic concerns like widening trade deficit and free-fall of rupee also added to worries of FIIs who booked profit across sectors. The domestic currency tumbled by 59 paise to 13-month low of 63.53. The 30-share BSE index resumed the day sharply lower in line with weak Asian cues and remained under selling pressure throughout the day.

It finally closed at at 26,781.44, a steep fall of 538.12 points or 1.97%. The previous worst single day loss was logged on September 3, 2013 when Sensex tanked by 651.47 points. Selling pressure was so intense that 10 out of 12 indices ended the day with losses in the range of 1.44% and 4.17%, with metal, realty, FMCG, banking, consumer durable, healthcare and power being the worst hit. Shares of software exporters, which would benefit from rupee fall, ended higher along with and teck firms.

Sesa Sterlite was the biggest loser among 30 Sensex stocks at 7.77%. Dr Reddy's tanked 6.32%, Hindalco lost 5.67% and SBI 4.66%. Tata Power (4.59%), ICICI Bank (4.30%) NTPC (3.20%), ITC Ltd (3.13%), Tata Steel (2.82%) and HDFC Ltd (3.11%) were the other big loers. TCS notched up a gain of 3.40%, while Infosys was up by 0.69%. "Weak Asian markets, poor economic indicators from the domestic economy, liquidity roll-back fears due to Fed meeting and surprise rate hike by Russian central bank kept the global markets in turmoil for the day," said Rakesh Goyal, Senior Vice President, Bonanza Portfolio.

Bank of Russia raised key interest rate to 17% from 10.5% in a desperate move to boost its currency and rescue troubled economy. Rouble's value has sunk roughly 50% since January, battered by Western sanctions. Analysts said Russia's economy is highly dependent on petroleum revenues. The average price of a barrel of oil has dropped below $56 down from high of $107 a few months ago, the added.

The 50-share NSE Nifty touched the day's low of 8,052.60 before settling down by 152 points, or 1.85% lower at 8,067.60. "What a contradiction, when domestic inflation is trending in line, providing room for rate cut sooner or later. But markets continue to fall factoring higher global risk.... "As crude price continues to fall, the concern over global growth is increasing. Profit-booking has increased from FIIs. As usual impending Fed meet (Dec 16-17), adds to volatility in equities, commodity and currency markets," said Vinod Nair, Head, Fundamental Research, Geojit BNP Paribas Financial Services.

The total market breadth was sharply negative as 2,327 shares declined while only 541 that advanced, Reflective of heavy selloff in second line counters by retail investors. "Negative global cues and weakness in currency pushed the equity markets deep in the red. Sentiments further soured in reaction to the India’s trade deficit figure, which widened to 18-month high of $16.86 billion in November," said Jayant Manglik, President, Retail Distribution, Religare Securities.

Global crude oil prices (Brent) falling below $60 a barrel for the first time since 2009 will have a ripple effect across the global financial markets and economies, analysts said. Meanwhile, foreign portfolio investors have pulled out shares worth Rs 455.72 crore yesterday, as per provisional data. Except China that closed with gains, most Asian stocks finished remarkably lower as oil's slump and weaker-than-estimated Chinese manufacturing data stoked concerns that the global economy may falter.

Key indices in Hong Kong, Singapore, South Korea, Japan and Taiwan were down by 0.39-2.4%. However, European markets recovered from early hesitancy and were trading higher in their early morning trade. CAC was up by 0.59%, DAX by 0.87% and FTSE by 1.11%.