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Sunday, November 29, 2020

Bloodbath at Dalal Street: Here is why

Monday's 1,000 point fall is the biggest intra-day fall in absolute terms since October 2008 when it fell 1,070 point.

By: ENS Economic Bureau | Beijing/new Delhi, Delhi | August 24, 2015 2:22:40 pm
This is the biggest crash in about seven years and the fourth biggest ever for the BSE benchmark index. This is the biggest crash in about seven years and the fourth biggest ever for the BSE benchmark index.

The sell-off in the stock markets that gained momentum last week following fresh growth concerns in China, only increased on Monday and the benchmark Sensex at the Bombay Stock Exchange fell sharply by more than 1,000 points or over 3.75 per cent in the afternoon trading hours. The broader Nifty at the National Stock Exchange fell more than 300 points to trade below the psychological mark of 8,000.

The fall in Indian markets on Monday closely followed the sharp decline in the Dow Jones Industrial on Friday that fell 3.1 per cent and the big falls in the Asian markets on Monday morning. While the Shanghai Composite fell another 7.2 per cent on Monday, even the Nikkei in Japan fell 4.6 per cent.

Monday’s 1,000 point fall is the biggest intra-day fall in absolute terms since October 2008 when it fell 1,070 point. In per cent terms however it is the biggest fall since the 3.97 per cent fall on August 16, 2013 when the rupee was under pressure and had hit new lows.

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With growth concerns in China, Japan and other economies too feeling its impact, money is flowing into US in search of stability. This has resulted in a sharp depreciation of currencies of several countries against the dollar. The Indian rupee too has fallen by around 4 per cent over the last 10 trading sessions. On Monday it hit a fresh two-year low of 66.52 against the dollar.

The RBI governor, however, tried to cool nerves and said that RBI will have no ‘hesitation’ in using forex reserves to reduce currency volatility.

Speaking at an event in Mumbai Raghuram Rajan also said that Indian economy is in a relatively better position. “I wish to reassure the markets that our macro-economic factors are under control as the economy is in a much better position relative many other economies.”

Even market experts say that India should come out better than most from the current global volatility. “Falling crude is an advantage and the only short-term pressure will be on account of FII outflows since the money is moving out of emerging economies into the US,” said the CIO of a leading mutual fund.

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