MUMBAI:Domestic stock markets had a free fall on Thursday, with Sensex plunging 654 points or 2.33 per cent, on worsening West Asia crisis that also pushed up crude oil prices, uncertainty of Greek debt situation, the US interest rate outlook, and gloomy outlook on earnings of local companies.
The Sensex dropped 2,567 points or a shade less than 10 per cent over the past three weeks after the Sensex hit an intra-day record high of 30,024 on March 4, the third day of trading after Feb 28 Budget.
The pattern of Thursday’s decline showed a secular fall across the sectors with IT, Banking and Metals taking the lead. That blue chips were sold aggressively could be an indication of a sell-off that is more than transitory and may portend withdrawal of some large investors, may be foreign institutional investors.
Among the top Sensex losers included Housing Development Finance Corp, State Bank of India, Wipro, Infosys, ICICI Bank, Axis Bank, Sesa Sterlite and HDFC Bank.
The immediate trigger was a rise in global crude oil prices, threat of escalation of conflict and tension in West Asia with Saudi Arabia joining the attack on Yemen rebels that could disrupt oil supplies, a sell-off in top markets across the globe and most critically, the concern of government’s inability to push ahead with amendment to the land Bill and other reforms, including GST.
Most critically, investors don’t see any good news after two rate cuts by the RBI, the budget and likelihood of muted corporate earnings. Most banks continue to report rise in non-performing assets and a tardy pickup in demand for loans by the corporate sector.
“Going ahead, there are no immediate triggers for the markets on the domestic front and hence, markets may continue to be dictated by global factors. Quarterly results are also expected to be subdued,’’ Dipen Shah, head of private client group research at Kotak Securities. “Further action on the fiscal or monetary front, if any, can give some upside to the market.”
Brent crude rose about 5 percent to close to $60 per barrel; concerns over Greek debt situation that could suck in European economy, and uncertainties of U.S interest rate increase. These factors could keep global investors away from investing in the near term.
Traders, who keep the markets well lubricated, are shying away from increasing positions because of a spate of bank closures days over the coming week or so, as banks close for festivals and annual closing, delaying settlements.