Stock market crash today: BSE Sensex and Nifty50, the Indian equity benchmarks, crashed in trade on Thursday, with both indices down over 1%. Investors reacted to the RBI’s policy tightening and repo rate hike, continued FII selling and other negative factors. BSE Sensex plunged over 1,000 points while NSE Nifty50 slipped to 22,231 levels.At closing, Nifty50 was at 22,231.80, down 371.25 points or 1.64%. BSE Sensex was at 71,593.24, down 1,045.46 points or 1.44%. The sharp decline erased over Rs 11 lakh crore from the combined market capitalisation of companies listed on the BSE.ITC, Adani Ports, IndiGo, Power Grid and Reliance Industries (RIL) were among the biggest losers on the Sensex, with their shares declining as much as 4%. On the other hand, Titan and major IT stocks such as Tech Mahindra, HCL Technologies, TCS and Infosys gained up to 2%, providing some support to the benchmark index.
Why is stock market down today?
RBI’s policy stance changeThe RBI delivered its first rate increase in nearly four years. However, market analysts viewed the central bank’s decision to move its policy stance from ‘neutral’ to ‘calibrated tightening’, against a difficult global geopolitical backdrop, as the more significant signal for markets. Jefferies expects the RBI to raise interest rates by around 100 basis points during the current tightening cycle.Nomura also pointed to the change in stance as an unexpected development. “We believe this was aimed at anchoring inflation expectations and building a buffer against adverse global conditions. However, the message was mixed, with the MPC clarifying that “calibrated tightening” only signalled “no rate cuts”, and indicated data dependence going forward,” it added.VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited says that the calibrated tightening stance of the RBI has implications for markets.“With two more rate hikes of 25bp each likely in this rate hiking cycle, there will be pressure on valuations rising from higher fixed income returns. Investor preferences also might shift marginally towards interest inelastic segments like pharmaceuticals,” he says.US bond yields soar to 24-year highThe global selloff in bonds intensified, sending yields to their highest levels in several years. The US 30-year bond yield climbed above 5.71%, while the yield on benchmark 10-year notes rose past 5.3%. The two-year note yield also moved close to 4.9%.Rising bond yields generally make debt markets more appealing to investors, which can increase pressure on emerging-market equities. Since bond prices and yields move in opposite directions, a sharp rise in yields indicates significant selling in the bond market.Oil jumps above $102/barrelAdding to the pressure on markets, Brent crude prices rose another 2% to move above $102 per barrel. Investors remained worried about the security of Middle East oil supplies as attacks on shipments increased in the Gulf and around the strategically important Strait of Hormuz.Tankers travelling through the Strait of Hormuz faced the highest number of attacks in a single week since the Iran war began earlier this year, even as Gulf producers raised exports. The increase in attacks came as crude shipments from the Gulf increased, but with greater risks and higher costs for cargoes and crews. On Wednesday, the United Kingdom Maritime Trade Operations agency said a tanker north of Qatar had been hit by multiple projectiles, resulting in casualties.Meanwhile, US crude inventories fell by 3.2 million barrels last week to 424.1 million barrels, according to the Energy Information Administration on Wednesday. A Reuters poll of analysts had forecast a smaller decline of 1.7 million barrels.FIIs continue to sellThe record selling spree of FIIs continues, exacerbated by the rising bond yields. Foreign investors continued their selling spree in Indian equities on Wednesday, offloading shares worth more than Rs 6,121 crore on a net basis, according to provisional NSE data. Their net selling has now reached nearly Rs 57,000 crore across nine straight sessions through Wednesday.Since the start of September, FIIs have been net sellers in 20 of the 25 trading sessions. Their sustained selling, despite brief periods of buying, has continued to weigh on Dalal Street since the Middle East war began earlier this year.VK Vijayakumar notes that a distinct and strong trend in the market in recent months has been the increasing preference for growth stocks over value stocks.“Growth stocks are being accumulated at high valuations while value stocks are languishing at fair valuations. Sustained selling in large-caps by the FIIs have contributed significantly to this trend. With the US 10-year bond yield hovering above 5.3%, FIIs will continue to sell on every rally. This will put the Nifty large-caps under pressure for some more time,” he warns.“A reversal in this trend will happen only when FIIs turn buyers, and there is no clarity on when this will happen. In brief, this frustrating period in the market might continue for some more time. Remaining invested in value stocks will be rewarded in the long run. Investors should also look at the good opportunities in fixed income in this rising rate environment,” he adds.Fed rate hike worriesMinutes from the Federal Reserve’s meeting showed a split among policymakers last month over the case for raising interest rates. Some officials believed a hike was needed to contain the effects of energy and other price shocks, while a more hawkish group saw higher rates as necessary to guard against emerging inflation driven by demand.Traders currently see only an 18% probability of a rate increase later this month, while the odds of a December hike are being priced at 80%, according to CME’s FedWatch tool, as cited by Reuters.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
