Monday, 24 August 2015

The Sensex ended over 1,600 points down on Monday, the biggest in over seven years

The Sensex ended over 1,600 points down on Monday, the biggest in over seven years. The benchmark BSE Sensex fell 1,624.51 points, or 5.94 per cent to end at 25,741.56. The index opened at 26730.40 and touched a low of 25,624.72. The broader Nifty also fell 490.95 points, or 5.92 per cent per cent to 7,809. Investor wealth down over Rs 7 lakh crore. RBI Governor Raghuram Rajan reacting to Sensex falling over 1000 points and rupee tumbling to two year low said that the central bank will intervene when needed. He further said India is in better position relative to many other economies. Below are the reasons why Sensex fell over 1,600 points today 1. Global markets and China stocks crashing: Asian markets were trading in deep red in early trade on Monday with Shanghai shares crashing 8 per cent sparking widespread unrest in global financial markets. The Dow Jones industrial average on Friday fell 530.94 points, or 3.12 per cent, to 16,459.75, the S&P 500 lost 64.84 points, or 3.19 per cent, to 1,970.89 and the Nasdaq Composite dropped 171.45 points, or 3.52 per cent, to 4,706.04. For the week, the Dow dropped 5.8 percent and the Nasdaq tumbled 6.8 per cent. G Chokkalingam, founder and managing director, Equinomics Research & Advisory, said, "Today's fall can be attributed to nervousness in US and China markets. I believe, Indian markets will recover faster and will do better than other markets." 2. Indian rupee fall: Indian rupee fell to two year low and plunged by 66 paise to trade below Rs 66 level against the dollar for the first time in almost two years in opening trade on sustained capital outflows even as the US currency weakened overseas.At the Interbank Foreign Exchange Market, the rupee fell by 66 paise to 66.49 a doller in early trade. 3. Crude prices: Crude prices fell after slipping below $40 barrel for the first time in six years after weak Chinese manufacturing data. Dipen Shah, head of private client group research, Kotak Securities, said, "The global risk off trade has impacted Indian equity markets also. India, however, derives some positives from the current global meltdown. Brent crude, at $44 per barrel, will ease the current account deficit further, which will also have a positive impact on inflation. This will be a serious positive for several Indian companies. The rupee depreciation will also be positive for exporting sectors and companies, especially the ones which have large exports to US. Thus, beyond the current sell-off, markets will likely focus on sectors which benefit on a fundamental basis. On the macro front, passage of crucial reforms bills like GST will make India stand out among emerging markets and we need to wait and watch out for the same." 4. IOC offer for sale(OFS): The government's 10 per cent stake sale in Indian Oil Corp was over-subscribed despite high market turmoil. Geojit BNP Paribas Financial Services' Vinod Nair said, "The two important factors which led to today's chaos is the sharp fall in the INR due to the increase in risk to emerging market (EM) currencies and the high demand to the OFS of the IOC requiring a total outflow of 9400 cr. The sudden collapse in the developed equity market in the last 3 trading days due to continued breakdown in EMs has led to the carnage today in India (MSCI-World has fell by 6% during the last 3 trading days).

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