We are seeing an extended impact in the domestic market post the LTCG and fiscal deficit turmoil.
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On what has been dubbed as a “Terrible Tuesday”, the Sensex tanked 1275 points in the morning trade, but finally ended 561.22 points or 1.61% down at 34,195.94, while the Nifty, which fell 390 points intra-day, settled at 10,498.25, down 168.30 points or 1.58%. As of today the Sensex has been sinking for six consecutive sessions. The decline in percentage terms – 4.6% – was the biggest since August 2011, during the Eurozone sovereign debt crisis. Rs 2.7 lakh crore of wealth was wiped out in today’s session itself, amid sell-off in world stocks.
“For now, risk is off the table”. Some calling it ‘market mayhem’ and some calling it “carnage”. However, Finance Secretary Hasmukh Adhia said that the decline in the key stock market indices was primarily due to global market meltdown.
“Global growth is fine”. Additionally, it’s not only in the USA, there are concerns over bond yields (along with related concerns over inflation) in the domestic market as well.
Rupee plunged 29 paise in the early trade. It is still higher than the five-year and 10-year historical averages of 15.6 times and 14.94 times, respectively.
BSE Sensex was down 618.46 points or 1.78 percent at 34,138.70. Software exporters contributed the most to the losses for Sensex.
Tata Motors (-5.8%), Axis Bank (-4.7%), HCL Tech (-4%), GAIL (-3.9%), Kotak Mahindra Bank (-3.8%) and UPL (-3.5%) were the top losers in today’s trade. It raised the alarm about rising inflation that could eventfully force the Federal Reserve to hike interest rates to control the inflation.
At 12:22 pm: BSE Sensex is still over 1,000 points down.
The S&P 500 plunged as much as 2.1% at the open of trading on Tuesday before regaining ground. The only gainer on this index was Tata Steel, up by 0.06%. Every bounce from now on is expected to bring fresh selling pressure at higher levels. This was despite Tata Motors reporting about a 13-fold rise in quarterly profit, driven by higher sales from its Jaguar Land Rover (JLR) business after a particularly weak quarter a year earlier. So in the USA context, hoping to see the 10-year bond yields stabilise and even in the Indian context, we are hoping that the 10-year bond yield does not run up further. Investors have linked the market crash to LTCG tax. “Investors should not panic and stop SIPs”. From the peak, the market is down around 5-6%.
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“While the concern over the LTCG (long-term capital gains) tax continues, the correction on Tuesday was driven more by a spike in global bond yields”, said Vaibhav Agrawal, head of research, Angel Broking. “This is a part of global correction”. Indian market just mirrored the freefall in United States equities, said Ritesh Jain, chief investment officer at BNP Paribas Mutual Fund.
