Why Sensex Plunged Over 2,400 Points In Just Three Days

Global selloff has shaved 2,400 points off Sensex in just three days while Nifty plunged below 10,300.

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Why Sensex Plunged Over 2,400 Points In Just Three Days

The Nifty plunged below 10,300 today at day's low while Sensex fell over 1,200 points.


The Sensex fell as much as 1,274 points today at day's low, taking its 3-day losses to over 2,400 points. The Sensex had tumbled 839 points on Friday and 309.59 points on Monday. The Nifty today tumbled below 10,300, hitting 10,276 at day's low. The Sensex and Nifty tracked a selloff in global equity markets. The Dow fell over 4 per cent overnight, its biggest selloff in over six years, while Japan's Nikkei slumped over 5 per cent today. Dow futures were down over 1.5 per cent, indicating the Wall Street is set to open sharply lower on Tuesday.
 

5 Things To Know About Selloff In Stock Markets



1. The latest US jobs data, which was released on Friday, has spooked global markets. Better-than-expected jobs data, which showed the strongest annual wage growth since 2009, prompted worries about inflation rising at a faster pace. This has led to possibility that the Federal Reserve - the US central bank - could raise rates at a faster pace than expected this year.

2. Bond yields in the US have spiked to multi-year highs on the possibility of faster-pace-than-expected pace of rate hike in the US and higher inflation, undermining the attraction of equities. "Since last autumn, investors had been betting on the goldilocks economy - solid economic expansion, improving corporate earnings and stable inflation. But the tide seems to have changed," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

3. Back in the domestic markets, the sentiment had also been weak due to imposition of a 10 per cent long-term capital gains tax on equities and concerns over fiscal deficit.

4. Some analysts say that the correction was overdue and they expect markets to settle down soon. "Markets had gone up too fast and a correction was more than overdue. All negatives including Fed hikes and inflation worries in India have come together. I expect 7 to 10 days for the markets to settle down," said Arun Kejriwal, founder of Kejriwal Research & Investment Services.

5. There are also concerns that the Reserve Bank of India (RBI) could turn more hawkish on inflation. The central bank is set to conclude its two-day policy meeting tomorrow and is expected to leave rates on hold but could issue stronger warnings about inflation. "We expect the RBI to remain on a pause in this policy. However, the tone will likely be more hawkish with probability of rate hikes in FY2019 increasing," said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.


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