What caused Sensex to plunge by 537 pts; Another crash, by 2%, expected

There seems to be no respite for the bulls. The stock markets slumped further into the red on Monday as the benchmark BSE Sensex tanked 537 points as investors, fearing liquidity crisis, continued to dump banking and non-banking finance companies (NBFCs) stocks. The fall was despite finance minister Arun Jaitley’s assurance to ensure adequate liquidity for MBFCs and mutual funds and RBI and Sebi’s statement to take necessary action, if needed.

Falling for the fifth consecutive session, Sensex tanked 536.58 points, or 1.46%, to end at a two-month low of 36305.02, logging its biggest single-day loss since February 6, when it had shed 561.22 points.

The broader NSE Nifty slipped below the 11000-mark and closed at 10967.40, plunging 175.70 points, or 1.58%.

The sentiment was also dampened by a rise in Brent crude prices, which hit a four-year high before trading at $80.07 a barrel, while the rupee fell 43 paise to close at 72.63 per dollar.

The broader market, too, continued to bleed with the BSE Midcap and Smallcap indices losing 2.40% and 2.72%, respectively. “The correction is happening in the high valued stocks. We will see a sector rotation happening in the coming days. Around 2% correction is more possible in the near-term,” Rahul Shah, vice-president, equity advisory group at Motilal Oswal Financial Services said. Shah said the correction is overdone now and the investor shift is expected from the NBFCs to banks. Investors would also watch the F&O expiry this week along with global events like US Federal Reserve meeting. 

Investors have lost Rs 8.48 lakh crore in the last five trading sessions as the 30-share index lost a total of 1,785.62 points, or more than 5%.

Shares of Edelweiss Financial Services plunged 8.43%, Indiabulls Housing Finance 7.57%, PNBHousing Finance 7.56%, Cholamandalam Investment and Finance Company 7.15%, Can Fin Homes 6.39% and Gruh Finance 5.88%.

“The Government will take all measures to ensure that adequate liquidity is maintained/provided to the NBFCs, the mutual funds and the SMEs,” Jaitley had tweeted ahead of the opening of stock markets.

From January 1, until Monday, the 30-share index has gained 2,492.72 points, or 7.37%. The index had hit a high of 38896.63 on August 28. The 50-share Nifty, on the other hand, has gained 531.85 points, or 5.10% from January 1 until Monday. The index had also hit a lifetime high of 11738.50 on August 28.

Among the Sensex stocks, Mahindra & Mahindra, HDFC, IndusInd Bank, Adani Ports and Bharti Airtel were the biggest losers, shedding as much as 6.46%.

Sectorally, except BSE Information Technology (2.06%) and Energy (0.44%), 17 sub-sectoral indices closed in the negative zone. BSE Realty was the biggest loser, plunging 5.10%, followed by Auto (3.75%), Finance (3.46%), Telecom (3.30%) and Consumer Discretionary Goods and Services (3.03%).

FIIs sold shares worth Rs 523.94 crore on Monday while the DIIs bought shares of Rs 1,527.67 crore on a net basis.

Source: DNA Money