Markets rudderless; Sensex crashes 770 points on slowing GDP growth

Mumbai: Despite a series of confidence building steps announced by Finance Minister Nirmala Sitharaman to revive private investment, investor confidence remains subdued. Neither the transfer of the RBI reserves, nor the ‘big bank’ theory of the government, has brought much cheer.

Rather, the sentiment has been subsumed by weak GDP numbers released over the weekend, which resulted in a bruising sell-off in the markets on Tuesday, knocking 770 points from Sensex. Growth-sensitive stocks, State-run banks and manufacturing companies contributed most to the fall.

For the record, Sensex has clocked its worst fall in 11 Months. It fell by 769.88 points or 2.06 per cent, while the broader Nifty declined by 225.35 points or 2.04 per cent. In the ensuing melee, investors' wealth worth Rs. 2.56 lakh crore was wiped out.

India 'VIX' or the volatility index -- the market's expectation of volatility over the near term -- closed at 18.60, after it surged nearly 12 per cent. "The sharp fall in the Q1 GDP growth to 5 per cent and the weak core sector growth are the key factors that have caused a fall," said Joseph Thomas, Head of Research-Emkay Wealth Management.Weak domestic consumption, especially rural consumption, has resulted mainly from low employment levels and non-availability of finance, which are issues that call for immediate redressal, he added.

Nifty PSU Bank index fell the most on Tuesday - by nearly 5 per cent. It was followed by heavy selling in metal stocks, with the index declining by over 3 per cent. "The consolidation of PSU banks is a step in the right direction. However, it will be some time before benefits from the synergy start trickling in," said Vinod Nair, Head of Research, Geojit Financial Services.

Investors essentially reacted to the data released on Friday which showed that India grew at its weakest pace between April and June since 2013. Besides, poor monthly auto sales data and weak core sector data added to the sell-off.Except for HCL Tech and Tech Mahindra, all the 30 Sensex scrips finished lower.

ICICI Bank, Tata Motors (DVR), Tata Steel, Vedanta and HDFC comprised the top index losers, declining in the range of 3 to 5 per cent. The markets also continue to be pilloried by selling pressure from foreign investors, which sold a net $2.3 billion worth of Indian stocks last month.

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