Investors lose over 3 trillion as Sensex nosedives 787 points
NEW DELHI: Investors lost $ 3 trillion over on Monday, as the BSE Sensex nosedived 787 points, slipping below the 72-mark and monitoring spike in crude oil prices. This is Sensex’s biggest single-day fall since September 2019.
Oil prices hit a near high due to tensions between Iran and the US, after the US killed the top commander of Iran General Qassem Soleimani early on Friday.
“Indian market is reacting more negatively than other emerging markets because of crude oil impact. Since our reliance on crude imports as a proportion of consumption is the highest, the effect on market and markets is also higher,” said Rusmik Oza, senior vice president and head of basic research at Kotak Securities.
Owing to the negative market breath, 28 of 30-share Sensex closed in the red. While 1,944 shares declined on the BSE, overall, 603 shares advanced. Among sectoral indices, Metal Index was the biggest loser and slumped 3% followed by BSE Bankex, which slipped 2.4%.
The market witnessed a deep dip as a result of unexpected spike in India’s 10-year bond yield from 6.50 to 6.55% and sustained weakness in the rupee. The slump was due to negative flows, which is unlikely to escalate. The advance to decline ratio was steeply down in 1:4, suggesting the sell-off was broad based.
“Along with primitive, the negative impact of currency is also weighing on Indian markets. The tension has increased the chance of unknowns which is getting factored. India’s Nifty-50 index was trading in a new zone on the back of budget expectations, just before the event took place. But forward PE of Nifty-50 at 19x was close to its previous peak which made it vulnerable to any external shock,” Oza added.
The friction between the two countries started Friday after the US killed a top Iranian commander in an air strike. The situation further intensified after President Donald Trump threatened sanctions against Baghdad on Sunday, after which Iraq’s parliament called to leave the country. Trump also jeopardized”major retaliation” against Iran if Tehran were to retaliate for the killing.
“Escalating tensions may dent market risk appetite and weigh down on riskier assets such as international equity markets and commodities like base metals. But it may continue to lend support to safe haven like gold and silver and will also be supportive of crude oil prices amid worries over supply disruption from the area.