The Sensex on Thursday plunged by 807 points, or 3.4 per cent, to 22,951.83, its lowest in last 21 months, on continuing fears of a global slowdown and concerns over mounting bad loans of state-run banks.
Globally, market sentiments were hit following US Federal Reserve Chairperson Janet Yellen’s testimony to the US Congress on Wednesday suggesting that even as she saw risks to the US economy, the bank would continue on the rate hike path that began in December. This is a new low for the index during the current NDA regime and the lowest since May 8, 2014, when the Lok Sabha elections were underway that saw BJP-led alliance sweeping to power. The Nifty index of the National Stock Exchange closed for the day at 6,976 points, down by 3.32 per cent or 239 points over Wednesday’s closing levels. The Sensex is already down by 7,000 points from the all-time peak of 30,024.74 on March 4, 2015 in less than a year.
Foreign investors who have already sold a net $1.9 billion (around Rs 13,000 crore) in shares so far this year is expected to pull out more funds if the US Fed hikes rate again. FIIs too played their part and pulled out a net of Rs 1,112 crore on Thursday.
While the fall in Sensex over the last four trading sessions has now aggregated to 1,607 points or 6.5 per cent, the benchmark index is now trading at a discount of 23.5 per cent to the level of 30,000 it had hit 11-months ago. It is important to note that the fall in the stock markets have come despite the economy expected to clock a 7.6 per cent growth rate for the year 2015-16, low crude oil prices and domestic institutional investors investing a net of Rs 86,000 crore between April 2015 and February 2016.
While these factors favour the domestic economy and the markets, experts say that the culprit this time around for the decline in markets is not domestic but global factors as there have been growing concerns over recovery in global growth. If there have been growing concerns over slowdown in China, decline in commodity prices and crude oil prices reflected the slowdown in global demand and pace of recovery across the world.
Banks stocks, meanwhile, plunged by up to 11 per cent amid concerns over mounting bad loans and disappointing earnings reported by them. Oriental Bank of Commerce dipped 11.06 per cent on the BSE, followed by United Bank of India 7.61 per cent, Allahabad Bank 6.94 per cent, Bank of India 5.96 per cent, Central Bank of India 4.06 per cent, Indian Overseas Bank 4.01 per cent, PNB 4 per cent, Union Bank of India 3.26 per cent, SBI 2.99 per cent and Dena Bank 2.08 per cent. Consequently, the BSE bank index fell by 3.81 per cent to end at 15,889.92. Some of these banks had fallen by over 12 per cent on Wednesday.
European stocks traded sharply lower, dragged down by a sell-off in banking and mining stocks, as concern intensified that the global economy is slowing.
Hong Kong’s Hang Seng index, which resumed trading today after being shut from Monday through Wednesday for the Lunar New Year holiday, fell 3.85 per cent. In South Korea, the Kospi finished the session down 2.93 per cent.
Meanwhile, the rupee on Thursday plummeted by 45 paise to end at an over 29-month low of 68.30 a dollar on fresh demand for the US currency from banks and importers in view of sharp fall in equities.