After rising for three consecutive days, Sensex and Nifty have been on a downward spiral for past two days. On Tuesday, the 30-share benchmark index declined on a jump in crude prices. Sensex fell 175 points, or 0.53%, lower to close at 33,053 points. The Nifty closed 47 points, or 0.46%, lower to close at 10,193 points. The fall was compounded by rise in inflation, the figures released on Tuesday. Retail inflation jumped significantly to 15-month high of 4.88 per cent in November, from 3.58 per cent in October.
Here are the five reasons that caused the Sensex to fall by 403 points in just 2 days
First. On Tuesday, Sensex over 200 points since Brent crude oil, the international benchmark for oil prices, jumped above $65 per barrel for the first time since 2015 after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market that was already tightening due to OPEC-led production cuts.
Second. RBI last week kept its policy rate steady at 6 per cent as widely expected, but slightly softened its language on inflation by saying risks were "evenly balanced." Investor remained cautious that higher global crude oil prices would stoke inflation and impact future interest rate decisions by the Reserve Bank of India.
Third. Retail or consumer inflation increased sharply to 15-month high of 4.88 per cent in November, from 3.58 per cent in October, driven mainly by faster rises in prices of food and fuel products. The November inflation number is higher than the Reserve Bank's 4 per cent medium-term target, reducing the room for the central bank to cut rates in near future.
Fourth. Industrial output growth eased to 2.2 per cent in October from upwardly revised 4.1 per cent year-on-year increase in September, as demand continued to suffer from disruption caused by the rollout of the GST.
Fifth. Unitech brings realty index down. After Supreme court ordered the stay on NCLT's order of takeover of Unitech by the government, the company's shares fell by around 17%. On Wednesday, the BSE realty index fell by 2.27%.