The Bombay Stock Exchange (BSE) on Monday crashed by 2300 points and Nifty hit a new low at 646.95 points in early trading.
While Sensex closed down by 1,941.67 points (5.17%) at 35634.95, Nifty was down 538.00 points (4.90%) at 10451.50. Various reasons are being attributed for this downward freefall.
Let’s take a look at what caused today’s bloodbath at Dalal Street and what it means for investors and the economy at large.
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Why did the Sensex fall today?
The equity indices fall due to various reasons like the investors withdrawing from the market and the global situation prevailing among other reasons.
Three major reasons are being attributed to today’s bloodbath. They are related to the increase in a number of COVID-19 cases, the Yes Bank Crisis and the rise in global crude oil prices.
COVID-19 has resulted in the global markets crashing as trade and investments from and to China has been impacted. This virus has spread to about 100 nations and of course, economic activities have either come to a complete standstill or are experiencing stressful conditions. The market has reflected that.
The YES Bank crisis last week is yet another continuation of stress in the banking sector in India and the major source of capital in India is the banking sector. Investor behavior may have reflected their worst fears.
The Oil War between the biggest producers has spell doom for the Indian economy and this may have shaped investor behavior. This has also ensured that the value of the Indian rupee has depreciated. It currently stands at 1USD =Rs 74.
Which companies have lost majorly because of today’s fall?
The biggest losers following today’s freefall are IOC, HPCL, ONGC (all oil firms), Reliance industries, Indusland Bank and Tata steel.
Investors have lost a whopping Rs 6 Lakh crores.
When was the last time Sensex dropped so majorly?
In recent times, the Sensex crashed by 987 points after the presentation of this year’s Union Budget, on February 1, 2020.
What does this mean for India and the world?
The prices in the stock exchange can be used to gauge the mood of the investors and the level of economic activity in the nation. Hence, sustained fall in the Sensex can be bad news for the investors who will eventually withdraw.
This will also impact the foreign investments into India, most likely the FII (Foreign Institutional Investors). This fall has to be tackled by the government, which has to fix the issues which impact the stock market. However, if it’s a one-day event, there is not much to worry about as markets will rise again.