The Sensex plunged 1066 points on Thursday as a 10-session rally got upended by negative global cues and profit booking with the selloff wiping out Rs 3.25 lakh crore of investor wealth in a single day.
Equities worldwide are under pressure as the possibility of another round of US fiscal stimulus fades, while more European countries brace for a second round of lockdowns to curb the rising coronavirus cases, posing yet another challenge to the already shaky global economic recovery.
Back home, there was nothing to cheer about as investors booked profits in an expensive market that has shown a disconnect with the economy.
Retail inflation has been well above the RBI’s comfort zone, limiting any chances of a further interest rate cut, while the Centre’s recent fiscal stimulus is being seen as too little, too late.
Moody’s Investors Service on Thursday said the Centre’s second round of stimulus will spur consumer spending in the near term but support to economic growth will be minimal.
“Global cues were weak as fresh Covid concerns and fading hopes of more US fiscal stimulus before the presidential election weighed on market sentiments,” said Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services.
He said investors would keep a close watch on earnings announcements, rising Covid cases globally, developments around the vaccine and the US elections .
Investors could use this opportunity to buy on dips in select defensive sectors such as IT, healthcare, FMCG and rural-focused stocks, he said.
On the BSE, the 30-share Sensex opened in the green at 41048.05 and then remained under pressure. However, the slide accelerated in late noon trade and the index fell below the 40000 mark to hit an intra-day low of 39667.47.
The BSE belwether later closed at 39728.41, showing a fall of 1066.33 points or 2.61 per cent. Similarly, the broader NSE Nifty crashed 290.70 points or 2.43 per cent to 11680.35.
Barring Asian Paints, which inched up 0.32 per cent, all Sensex constituents closed in the red. Bajaj Finance was the top loser, crashing 4.68 per cent, followed by Tech Mahindra, IndusInd Bank, ICICI Bank, SBI, Reliance Industries, Bharti Airtel and HCL Tech.
“The market had moved up on expectation of a big stimulus, but the desired fiscal package was not announced in India... this has changed the trend,” said Vinod Nair, head of research at Geojit Paribas.
Nair said the future trend would be determined by any additional stimulus measures and commentary on second quarter results.
Rupee falls
The rupee on Thursday settled 5 paise lower at 73.36 to the dollar as weaker Asian peers and fund outflows from domestic markets weighed on investor sentiment. Additionally, importers’ mid-month dollar demand also put pressure on the local unit, analysts said.
