What Is Fueling The Stock Market Crash

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New Delhi: Stock markets in India have been witnessing steep corrections, especially for the past 5-6 days, due to sharp fall in the global markets amid indications that US Federal Reserve will tighten liquidity and hike interest rates. Barring Federal Reserve’s liquidity policy, here are a few reasons behind the sharp sell-off in equities in the Indian stock market.

Rise in Omicron cases: The rise in Covid cases, including the Omicron variant, continue to worry investors globally. Though there is a steep fall in new infection rate in the country, it is still not clear whether the curbs will continue in the future.

Weak global cues: The continuous selling in the US stocks dragged Asian stocks lower. Shares in the Asia-Pacific region followed Wall Street lower, with all major markets settling in the red. European stocks also extended their losing streak after weak cues from Wall Street as investors weighed the rise in the US bond yields and crude prices.

Rise in crude oil prices: The rally in global crude oil prices also weighed on Indian equities. Though crude oil has receded from its recent peaks, it is still up more than 10 per cent for the year. Brent crude futures, a global benchmark, are currently hovering the $87-88 per barrel mark. Morgan Stanley has raised its forecast for Brent to $100 a barrel for the second half of 2022. India meets the lion’s share of its oil requirement through imports.

Inflation rate: Higher inflation rate across the globe is fueling concerns about faster-than-expected interest rate hikes.

Spike in bond yields: The sustained rise in bond yields globally injected negativity in the market. It also reignited fear of interest rate hikes by the US Federal Reserve by March 2022.

Profit booking: Ahead on the Union Budget, investors have resorted to profit booking to take advantage of the recent rally in the stock market. Sustained selling by foreign investors amid the uncertainties have also triggered sell-off in the market.

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On Monday, the BSE Sensex, which crashed nearly by 2,000 points during intra-day, finally closed 1,546 points down at 57,491.51, while the NSE Nifty Index tanked 468 points to 17,149.10.

After Monday mayhem at Dalal Street, investors have become poorer by a massive Rs 19.5 lakh crore, as equity market sell-offs continued for the fifth day in a row on Monday, according to a report in PTI. This is the steepest single-day drop for the indices in around two months.

On Monday alone, the market capitalization (Mcap) of the BSE-listed companies plunged by Rs 9.13 lakh crore. If we take into account of the past five sessions of the BSE Sensex, we can see that the 30-share platform has tumbled 3,817 points (6.22 per cent).

The market capitalization of the BSE-listed firms have eroded by a whopping Rs 19.5 lakh crore to Rs 2.60 lakh crore because of continuous hectic selling over the past five trading days. However, the Mcap of the BSE-listed companies had reached a record high of Rs 280 lakh crore on January 17, 2022.

Tata Steel was the biggest drag among the 30-share frontline companies pack, falling 5.98 per cent, followed by Bajaj Finance, Wipro, Tech Mahindra, Titan, Reliance Industries, and HCL Tech in Monday’s trade.

In the broader market, the BSE smallcap index fell by 4.43 per cent and midcap index dropped 3.82 per cent on Monday.

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