The 30-share BSE index plunged 1,046 points, or 1.99 percent, to close at 51,496; while the broader NSE Nifty was down 332 points or 2.11 percent at 15,361.
Tata Steel, Tech Mahindra, Bharti Airtel, Wipro and IndusInd Bank were the biggest losers in the sensex package with a drop of a whopping 6.04 percent. Twenty-nine of the 30 stocks ended in the red.
Nestle was the only winner in the BSE index, with a marginal increase of 0.3 percent.
On the NSE platform, all sub-indexes ended in the red, with Nifty Metal, Media and Realty falling a whopping 5.24 percent.
Sales across the board had a devastating effect on headline indices, with index majors Reliance Industries and HDFC twins contributing the most to the decline.
Both sensex and Nifty have now plunged to their new 52-week lows. Stock markets have been under pressure since the Russian invasion of Ukraine in February.
Uncertainty amid the ongoing geopolitical crisis had caused a spike in inflation in the world’s major economies. All this at a time when countries were gradually recovering from the malaise caused by the Covid-19 pandemic over the past 2 years.
Investors lost Rs 5.54 lakh crore in Thursday’s session with the market cap of all BSE-listed companies standing at Rs 2,39,20,631.65 crore.
“Just a look at the stocks hitting a one-year low today reflects the risky mood on the streets as only a handful of FMCG stocks showed a green tick among the frontrunners,” S Ranganathan, head of research at LKP Securities told PTI . †
Here are some factors that have dragged the markets to their year-long low:
* Ukraine war
The escalating crisis in Ukraine dragged stock markets around the world down. BSE sensex has fallen by more than 5 percent since February 24, when Russian forces invaded Ukraine.
The uncertainty surrounding this crisis made investors nervous and their preference shifted to safe-haven assets as they dumped riskier stocks.
As a result, investors lost more than Rs 3 lakh crore as the market cap of BSE listed companies dropped to Rs 239 lakh crore today as compared to Rs 242 lakh crore on Feb 24.
* FII Sales
Foreign institutional investors (FIIs), once known as the driving forces behind India’s equity markets, have abandoned domestic equities amid weak global sentiment.
In fact, June is the 9th consecutive month in which FIIs remained net sellers, relinquishing more than Rs 31,000 crore worth of f shares so far.
* Global Markets
Not just in India, but sentiment in global equity markets was weak.
The US S&P500 confirmed to be in a bear market 2 days ago. This is the 2nd time in 2 years that Wall Street has been in the grip of bears. The barometer is nearly 22 percent below its peak reached early this year.
In addition, foreign investors have been withdrawing money from emerging Asia excluding China for five months in a row, amid fears of inflation and an unwillingness in the region to raise interest rates in the face of slowing global growth.
* Inflation rising
The war in Ukraine has pushed up food and energy prices as the fighting disrupts supplies of oil, natural gas, grain and cooking oil. That adds to the price hikes that started last year as the global economy began to recover from the Covid-19 pandemic.
While global post-pandemic demand, extreme weather, tightening food supplies, high energy prices, supply chain bottlenecks and export restrictions and taxes have weighed on the food market for two years, the recent convergence of all these factors after the Russian invasion has been unprecedented and has caused food inflation around the world to soar.
India’s consumer price index (CPI)-based inflation for May stood at 7.07 percent on the back of a rise in edible oil and fuel prices. Retail inflation has remained above the Reserve Bank of India’s (RBI) comfort zone of 6 percent for the fifth straight month.
While wholesale price-based inflation remained in double digits for 14 straight months, rising to 15.88 percent in May.
The war has also forced India, the world’s second-largest wheat producer, to halt grain exports to stem rising domestic prices and avoid potential shortages.
* Energy markets in chaos
The Russian invasion of Ukraine and the ensuing international backlash have sent energy markets into chaos, with severe economic consequences to rival those of the oil shocks of the 1970s.
The sudden economic isolation is choking a major global source of energy, metals and crops. It threatens the very foundations of Russia and raises fears of something the developed world has not suffered in decades: acute inflation and real energy shortages.
It’s not just energy. Wheat jumped to its highest level since 2008, exceeding $400 a tonne in Paris, when the war in Ukraine cut off about a quarter of world exports. Aluminum hit an all-time high of over $3,800 a ton on the London Metal Exchange and copper hit its all-time high last month.
* All eyes on the US Fed decision
Inflation in the US, which had been under control since the early 1980s, rose with vengeance just over a year ago, largely due to the economy’s unexpectedly strong recovery from the pandemic recession.
Just three months ago, the Fed started raising interest rates.
On Wednesday, the Fed raised its key rate by 75 bps. Since 1994, the central bank has not suddenly raised its key rate so sharply.
US Federal Reserve Chairman Jerome Powell has pledged to do whatever it takes to curb inflation, now raging at a four-decade high, and defy the Fed’s efforts so far to tame it.
* Recession fears looming
Investments of all kinds, from bonds to bitcoin, have collapsed this year as high inflation forces central banks to try to slow the inflation that has flared up as economies recover from the disruptions of the pandemic. The war in Ukraine has added to that price pressure.
Powell said on Wednesday the Fed is moving “quickly” to push interest rates closer to normal levels, following last week’s stunning report that consumer-level inflation unexpectedly accelerated last month, threatening hopes that inflation might already have peaked. reaches.
However, he also hinted that rate hikes may be smaller later this year. That seemed to allay fears that the central bank would miss its target to cool inflation and send the economy into a downturn.
The Fed is “not trying to cause a recession now, let’s be clear about that,” Powell said. He called Wednesday’s big increase ‘front-end loading’.
Even without a recession, higher interest rates have negatively impacted investment prices. The hardest hit have been those that rose the most in the easy money era of ultra-low interest rates, including high-growth technology stocks and cryptocurrencies.
* Rate increases by RBI
The Reserve Bank of India (RBI) raised its key key rate after a gap of more than 2 years. Over the past 2 months, the repo rate has increased by 90 basis points (bps) and is now at 4.9 percent.
Food and fuel are the two main sources of inflation in India and prices of most foodstuffs have skyrocketed in recent months due to supply disruptions caused by the Russian invasion of Ukraine, erratic weather and export restrictions.
India supplies two-thirds of its demand for vegetable oil through imports. Sunflower oil imports from the Black Sea region have been crippled by the war, while palm oil supplies have been hampered by Indonesian export restrictions.
* Drag rupee
The rupee fell to its new all-time high of 78.22 against the US dollar on Wednesday as a lackluster trend in domestic equities and continued outflows from foreign funds weighed on investor sentiment.
The domestic currency has now closed at record lows for four consecutive sessions.
Rising crude oil prices have also contributed to the rupee’s woes as the price of Brent crude hit a three-month high of $125.14 a barrel on Tuesday. will lead to a further depreciation of the rupee towards the level of 78.55/78.75,” Emkay Global Financial Services said.
However, the dollar index fell from its high level after the Federal Reserve raised interest rates by 75 basis points and forecast a slowing economy and rising unemployment in the coming months, traders said.
The rupee recovered from its record low on Thursday, closing 12 paise higher at 78.10 (for now) against the US currency, tracking overnight dollar weakness and falling crude oil prices.
* Covid uncertainty
After the heavy second wave of Covid, India saw 2 more waves since last year. However, neither was as intense as the one in May 2021.
When the 3rd wave hit in December-January, states resorted to partial lockdowns and imposed restrictions on business activities physically conducted. As a result, the Omicron variant shocked the sentiments.
The BSE sensex last scaled its record peak in October 2021, when it crossed the 62,000 mark. Since then, the markets have been under pressure.
There was some relief in early February, but it was short-lived as the Russian invasion of Ukraine made matters worse.
(With input from agencies)