Sensex sheds over 500 points as global markets nosedive
Mumbai: Benchmark equity index Sensex shed more than 500 points on Friday morning, mirroring yet another day of bloodbath in markets from New York To Tokyo, as investors continued to fret over strong bond yields with US treasuries rising close to four-year highs.
US stocks nosedived around 4% on Thursday in another violent session, moving into correction territory, and Asian markets traded sharply lower with Japan’s Nikkei dropping 2.5%, while China’s Shanghai Composite index shed around 4.11%.
At 9.20am, BSE’s 30-share Sensex dropped 1.5%, or 516.43 points, at 34,896.73 points, while National Stock Exchange’s 50-share Nifty fell 1.52%, or 160.35 points, to 10,416.50 points. They are down 5.8% and 5.5%, respectively, so far in February.
Concerns over firming inflation and bond yields, triggered by strong US jobs report, have triggered the selloff in the US market this month, and the rapid unwinding of heavily leveraged trades is leading to a domino impact on the market.
“The situation is further accentuated by massive increase in volatility (VIX) trading,” said Sanjay Guglani, chief investment officer of Singapore-based Silverdale Funds.
“The amount of investment in volatility (VIX)-related products shot multifold to over $5 billion in past 5 years. The VIX which was stagnating around 10 for several months spiked 300% to over 35,” he added.
All sectoral indices in India traded lower on Friday. BSE Telecom and BSE Bankex led the decline, trading 1.81% and 1.50% lower, respectively.
Market breadth was extremely weak with declining shares beating advancing ones in the ratio of 6:1 on the BSE.
All the Sensex stocks were in the red, with financials contributing the most to the losses. Private lender HDFC Bank shed 1.65%, while mortgage lender Housing Development Finance Corp. Ltd shed nearly 2%.
Rivals ICICI Bank Ltd and Axis Bank Ltd were down 2.69% and 1.72%, respectively.
“We believe massive spikes of volatility and ‘flash crashes’ are here to stay, and it never hurts to play safe by sticking to quality fixed income securities and diversifying well in case of equities,” Guglani said, referring to world markets.
“While we should be alert to contagion effect, the equity sell-off does not change the big picture, which is that the widespread global growth is intact,” Guglani added.