Sensex is below 34,000

A massive fall in the U.S. markets on Wednesday on account of trade worries and the recent rise in interest rates caused a sell-off in the equity markets across the globe on Thursday with the Indian benchmarks shedding over 2% during the morning session.

Background

The Indian stock market has been affected due to a multiple of factors including the sell-off in the US market, persistent selling by FII in India and proposed an increase in interest rates in the US.

Analysis

The 30-share benchmark Sensex lost more than 1,000 points during the session as most of the index heavyweights lost heavy ground.

The Dow Jones Industrial Average (DJIA) lost over 3% while Nasdaq closed lower by more than 4% on Wednesday.

In the morning, the Sensex was down 820 points at 2.38% at 33,941.15. The broader Nifty was trading at 10,199.45, down 260.65 points or 2.49%.

Elsewhere in Asia, Hang Seng was down nearly 1,000 points while Nikkei was also lower by almost 900 points. The benchmark index of China also lost over 4%.

Traders attributed the carnage in domestic bourses to the sell-off in international bourses after U.S. stocks tumbled on heavy correction in tech stocks, fresh concerns over Fed rate hike and looming impact of the U.S.’ trade war with the China.

Rising 10-year U.S. treasury bonds, jumping above 3% last week and the International Monetary Fund (IMF) slashing its global growth forecast and weakness in emerging markets, too spooked investors.

Widespread selling pulled down all sectoral indices led by realty, IT, metal and banking, that fell up to 3.66%.

The rupee slumped by 24 paise to an all-time low of 74.45 against the dollar due to heavy demand for the U.S. currency from importers.

Foreign portfolio investors sold shares worth a net of ₹1,096 crore on Wednesday, provisional data showed.

Assessment

Our assessment is the uncertainties in the global market will continue until the middle of December. We believe that it will be important for Indian companies to be well prepared to face the impact that any unilateral action by the US through CAATSA for the purchase of S-400 Russian missiles and the embargo on Iranian oil will have on India.