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Across-the-board losses add to alarm

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Sensex crashes 759 pts, Nifty ends below 10,300

Mumbai: Rising interest rates in the US, its impact on emerging markets, high crude oil prices and fears of a slowdown in global economic growth have wiped out investors’ appetite for risk, which has seen India’s hitherto stable headline indices plunge more than 2 per cent, at least three times, in a span of four weeks. The BSE Sensex slumped 759 points to end at a six-month low and NSE Nifty ended below the 10,300 mark on Thursday as global indices witnessed across-the-board losses.

The 30-share index, which commenced with a gap down opening, cracked over 1,000 points, breaching the 34,000-mark and hit a low of 33,723.53, before staging a partial recovery to touch a high of 34,325.09 in afternoon trade. The gauge finally ended 759.74 points, or 2.19 per cent, lower at 34,001.15. This is the lowest closing since April 11. It had gained 461.42 points Wednesday.


Similarly, the NSE Nifty settled at 10,234.65, down 225.45 points, or 2.16 per cent. It moved between 10,138.60 and 10,335.95 in day trade. “This sell-off is part of the global sell-off triggered by the sharp cut in the mother market US,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. This is leading to capital outflows from emerging markets (EMs) like India. Apart from the rising bond yield in the US and EM currency woes, there are global trade skirmishes impacting the sentiment, he added.

High interest rates in the US may push rates higher across the globe, especially in emerging markets, where companies tap the debt market to fund growth.  High crude oil prices and the rise in interest rates threaten to put an end to the nine-year-long bull run in equities as well as derail India’s consumption story, as borrowing costs for companies increase and crimp their profits, while purchasing power of consumers weaken, experts said.

“While most of the earlier fall could be attributed largely to domestic factors, the reason for Thursday’s fall is clearly global with the US markets falling sharply after President Trump’s acerbic comments against the Federal Reserve and the consequent sharp fall witnessed in all the major Asian markets,” said Dheeraj Singh, Head of Investments – Taurus AMC. In an unprecedented criticism by a serving US President, Trump said the Federal Reserve had gone crazy after the Dow Jones Industrial Average in New York tumbled by over 800 points on Wednesday, the biggest decline in more than seven months.

 

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