Investors wealth plummets by over ₹2.39 lakh cr as Sensex crashes over 850 points
2 min read 29 Aug 2022, 09:42 PM ISTIndian market faced heat on concerns of withdrawals from foreign investors who have emerged to be net buyers in August so far. India's volatility index climbed nearly 9% during the day.
PremiumEquity investors' wealth contracted more than ₹2.39 lakh crore as Dalal Street crashes on Monday on weak global cues following US Fed's hawkish remarks. Indian market faced heat on concerns of withdrawals from foreign investors who have emerged to be net buyers in August so far. India's volatility index climbed nearly 9% during the day. A broad-based selloff was witnessed across sectoral indices with the exceptions of slight buying in FMCG, energy, and oil & gas stocks. IT and Banking stocks were the worst hit.
US Federal Reserve chair Jerome Powell in the Jackson Hole speech hinted at keeping interest rates high to fight inflation at cost of economic growth. This sparked fear among investors about an economic slowdown. The street had expected a slower pace of rate hike after the July inflation reading which came in at 8.5% --- better than expected --- from an over four decadal high of 9.1% clocked in June.
Sensex closed at 57,972.62 lower by 861.25 points or 1.46%. Heavyweights TCS, Infosys, Tech Mahindra, Wipro, and HCL Tech were the top underperforming stocks. While Maruti Suzuki outperformed.
On sectoral indices, BSE Bankex dipped over 830 points, while the BSE IT index shed more than 975 points. Consumer durables, metals, and capital goods stocks also dragged.
Following the sharp decline in benchmark Sensex, investors' wealth dipped by over ₹2.39 lakh crore.
As per the data on BSE, the market capitalisation of the equity market stood at ₹2,74,56,316.27 crore on August 29 compared to last week's Friday level where valuation was around ₹2,76,96,111.60 crore --- thereby, a decline of ₹2,39,795.33 crore in a single day.
Meanwhile, the Nifty 50 plunged by 246 points or 1.4% and ended at 17,312.90. Nifty Bank slipped over 710 points. Nifty IT nosedived by a whopping 1,012.65 points in the day.
Whereas the Indian rupee stayed under pressure. The local unit depreciated by 7 paise to 79.91 against the US dollar on the back of stronger American currency amidst the hawkish stance. Further, the selloff in domestic equities along with soaring global crude prices added to the woes.
As of August 29, this month, FPIs inflow is around ₹49,140 crore in the equity market, as per NSDL data.
Why did markets crash today?
Vinod Nair, Head of Research at Geojit Financial Services explained Powell’s hawkish tone during the Jackson Hole symposium pointed toward a stricter rate hike while investors were expecting a milder policy action post the release of the softer July inflation reading. This has increased concern about an economic slowdown, which has caused a significant sell-off in the US market and spillover effects on markets around the world.
"The sell-off in emerging markets like India was exacerbated by concerns over the possible withdrawal of foreign funds, which was the backbone of the recent market rally," he added.
Similarly, Mitul Shah - Head of Research at Reliance Securities said, "Indian equities closed lower following weak global cues on hawkish comments from Jerome Powell at the Jackson Hole last week."
Going forward, Shah expects some profit bookings in the market in the near term.
Shah said, "The reserves have declined in August to the lowest level for the month in 14 years, while consumer wheat inflation is running at close to 12%. India's retail inflation may be moderating after hitting a peak in April but there are some upside risks that will weigh on the RBI's as it decides the course of future rate hikes. We expect some profit booking to continue in the near term."
