With the sensex having crashed terribly low, the financial massacre is boring down on Dalal Street. The third lowest in history in terms of absolute value, sensex has shattered to roots. Global outrage has extended to Indian markets leading to BSE sensex slumping as low as 1600 points or over 6 percent on Monday. Rupee could not survive with the global turbulence and sank down to fresh low in two years at 66.72 per dollar.
The severe loss in the index was led by losses in ICICI Bank, HDFC, Infosys, L&T, and Axis Bank. Similarly, Nifty also experienced the low below its crucial psychological support of 8,000 that accounts to the losses in IT, pharma, banking, auto, banks, capitals goods, metals, oil and gas stocks.
We have figured out some factors that have worsened the economy:
China steep low
China, an $11 trillion economy, allowed its $547 billion pension fund, the world’s largest, to be invested in the volatile stock market. A fresh sell-off triggered during the weekend because of the less of liquidity in the market and investment made by central bank. The world’s second largest economy broke down and settled down on hazardous grounds. The market has affected Indian economy this Monday crashing the sensex. A fresh low as observed in the global economy, as $5 trillion already wiped off their value since China‘s Yuan broke down on August 11.
Wall Street sell-off
Friday was horrific as the US market recorded its steepest low in the market since August 2011. Weak Chinese manufacturing data and sheer drop in China’s stock market are shivering the sentiments of people who are paying high prices for the stocks at time of minimal earnings and less growth as suggested by Wall Street sell-off.
The weak Chinese manufacturing data crashed the crude prices to six years low that is $40 barrel, a slip down that has affecting the global supply. 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”.
Indian Rupees fall
At the Interbank Exchange Market, Indian Rupee fell to two year low at 66.49 a dollar in every trade. For the first time in almost two years, Indian rupee plunged by 66 paise to trade below Rs 66 level against dollar in opening trade on sustained capital outflows.
Foreign investors in the sharp selling
A big sum of money has been pulled off by the overseas investors of around Rs 2,000 crore from the Indian stock market. It has started peeping its way since the beginning of August 11, as the Chinese economy has crashed adjoining the rupee concerns. According to depository data, “the net outflow by FPIs in equities stood at Rs 1,943 crore during August 3- 21, while they invested a net sum of Rs 79 crore in the debt market during the period, which works out to a net outflow of Rs 1,864 crore”.
A lot of apprehensions are piling, as investors are worried that the key reform bills on goods and service taxes might get delayed as the Government was unable to pass it during its monsoon session.
Finance minister Arun Jaitley embarked concern on this global turmoil saying “As far as India is concerned, the minister said “our response at this stage is very clear. We have to strengthen our own economy. We have embarked upon a path for one and quarter years… even in the midst of global slowdown India should emerge as one of the fastest growing economies in the world.”
Raghuram Rajan, the RBI Governor tried to calm the investors and said “India is better placed compared to other countries with low current account deficit, and fiscal deficit discipline, moderate inflation, low short-term foreign currency liabilities, very sizeable base of forex reserves,”