After an initial blowout Monday morning that pushed the S&P BSE Sensex to the day high of 40,010.17, markets lost ground as the trade progressed. The S&P BSE Sensex lost more than 1,200 points in intraday trading to hit a low of 38,714.43 as trading progressed. Around 2:45 p.m., the 30-share index was trading nearly 1,050 points, or 2.7 percent, below 38,465 levels.
Here are five key reasons that led to the market crash on Monday.
India-China geopolitical tension: Rising political tension between India and China interrupted the momentum of Monday morning. The situation in eastern Ladakh reportedly flared up again in the middle night of August 29-30 when troops from the Chinese People’s Liberation Army (PLA) violated the “previous consensus” reached during the military clashes. and diplomats. Following development, the Srinagar-Leh highway was closed to civilians, reports suggest. READ MORE HERE
Rate the correct sensitives: Although there were widespread sales, financial sector stocks corrected more on Monday with the Nifty Bank index, an indicator of the performance of private banks on the National Stock Exchange (NSE) that fell more than 3 percent. A similar drop was visible in the real estate and auto indices. Federal Bank and RBL Bank (more than 6 percent each); Bosch, Motherson Sumi and Eicher (between 5% and 7% less); and DLF, Sobha, Prestige Estates (down 5.5% to 7%) were among the top losers in the rate-sensitive group.
ALSO READ: Market May Need to Make Price and Time Corrections – Jigar Shah
“With inflation likely to remain high and trajectory uncertain, analysts expect the Reserve Bank of India’s monetary policy committee (MPC) to keep policy rates unchanged. “This could also limit the incremental liquidity relief measures (OMO / monetization), which the markets have been locking in due to excess government borrowing,” says Upasna Bhardwaj, economist and senior vice president at Kotak Mahindra Bank.
Small and Mid Cap Profit Reserve: The decline in the mid- and small-cap index was brutal. Both indices lost 3.8 percent and 4.1 percent, respectively, compared to the 2.7 percent drop in the S&P BSE Sensex in late-noon trading.
“Our concern is compounded by retail investors creating valuation bubbles in several small and mid-cap (SMC) stocks. Many small stocks with no income for more than three years have also rebounded to record levels. Once ‘smart investors’ If they make a profit in such SMC shares, the domestic market could suffer some problems, “warns G Chokkalingam, founder and chief investment officer of Equinomics Research.
ALSO READ: The market seems to be ignoring a possible recession in fiscal year 21: Sampath Reddy
Nervousness ahead of June quarter GDP data: Market participants also took home some gains ahead of April-June 2020 quarterly gross domestic product (GDP) data to be released today after market hours. Economists project GDP could shrink 19.2 percent in the April-June quarter from a year earlier, the steepest drop since the nation began publishing quarterly figures in 1996. READ MORE HERE
“For the first quarter of fiscal 21, we expect the statistics office to announce a GDP contraction of around 17.5 percent year-on-year,” Pranjul Bhandari, chief economist at HSBC Securities and Capital Markets wrote in a recent co-authored note. with Aayushi Chaudhary.
New margin rules: The new margin rules will go into effect on Tuesday, September 1. Markets regulator Securities and Exchange Board of India (Sebi) will meet again with the association of brokers, depositories and clearing corporations on Monday to discuss readiness to implement new rules on margins. commitment from September 1. Reports suggest that corridors are technically unprepared to implement the proposed framework and are seeking a one-month extension to implement it. READ MORE HERE
.
