The benchmark Sensex fell more than 1,200 points today, while the Nifty fell below key levels as the Indian stock market saw a sharp decline. Investors have been alarmed by this steep drop, which has erased a sizable amount of wealth in a single trading session. However, what caused this crash? Let’s examine the top five causes of the current market catastrophe.
1. Global Market Decline
The market meltdown of today has been significantly influenced by global cues. Global markets have been impacted by worries about increasing interest rates in the US as well as poor economic statistics from China. A severe sell-off in major US and European indexes caused risk aversion among investors globally, including in India.
2. Increasing Prices for Crude Oil
The price of a barrel of crude oil has risen to above $90 in recent weeks. Concerns over increased inflation and a possible increase in domestic gasoline costs have been raised by this development. Higher crude prices result in greater budget deficits and pressure on the currency for India, a net importer of oil, which depresses equities markets.
3. Outflows of Foreign Institutional Investors (FII)
The decline has been exacerbated by the sale of Indian stock assets by Foreign Institutional Investors (FIIs). Capital is leaving developing countries like India as a result of the recent increase in US Treasury rates, which has increased the appeal of the US market to overseas investors. The steep decline in stock indexes has been attributed in part to this persistent selling pressure.
4. Concerns About Domestic Inflation
Fears of further rate rises by the Reserve Bank of India (RBI) have been heightened by the latest retail inflation data, which shows a sustained rising trend. Both consumer spending and business profitability, which are important determinants of market success, are impacted by high inflation. Investor worries about sustained inflationary pressures are reflected in today’s decline.
5. Poor Predictions for Corporate Earnings
There have been a number of corporations that have fallen short of market expectations during the current earnings season. Due to macroeconomic challenges, analysts have also updated their earnings projections for the next quarters. This has lowered market sentiment, particularly in industries that suffered large sell-offs today, such as consumer goods, finance, and IT.
Affected Sectors
• IT and Tech: The IT industry was most hit by the crisis, with big businesses like TCS, Infosys, and Wipro seeing steep drops as a result of a lack of global cues and worries about tech layoffs in the US.
• Banking: Concerns over growing non-performing assets (NPAs) in the context of economic uncertainty led to significant selling pressure on banking and financial equities.
• Oil & Gas: Concerns about margin compression caused oil marketing businesses’ stocks to plummet as crude prices rose.
