Five Reasons Why the Sensex Fell Nearly 800 Points in Intraday Trade Today

Indian stock markets started the month of August on a sluggish note after seeing the worst July in 17 years. On Thursday, August 1, the S&P BSE Sensex closed down 462.80 points, or 1.23%, at 37,018.32, after falling nearly 800 points in intraday trade. The Nifty 50 index, meanwhile, closed below the 11,000 marks at 10,980, down 138 points, or 1.24%.

Here are five reasons behind the bloodbath on Dalal Street today:

US Federal Reserve statements: The US Federal Reserve, though, on Wednesday slashed rates by 25 basis points for the first time in a decade, but chairman Jerome Powell dashed hopes of any further cut in the near future. Consequently, US markets ended lower, while other Asian stocks were also trading weak.

Crisil cuts India’s growth estimate: Crisil has cut India’s GDP (gross domestic product) growth estimate for 2019-20 to 6.9% from 7.1% earlier on the back of weak monsoon, slowing global growth and sluggish Q1 data. According to Crisil, the near-term onus on monetary policy is now to stimulate India growth.

Auto sales: Maruti Suzuki (India) Ltd, India’s largest passenger car maker, on Thursday announced that July domestic sales have plunged over 36% from a year ago. Mahindra and Mahindra’s total auto sales also declined by 15%. Two-and-three-wheeler maker Bajaj Auto also reported 5% drop in July sales.

Corporate earnings: Earnings announced in the June quarter so far have not been very encouraging, with extremely few surprises and bigger disappointments. Moreover, many banks while announcing their earnings have hinted at stress on their asset quality while raising their provisions. Fears of another round of NPA (non-performing assets) crisis are now looming on the investor’s mind.

Persistent selling by foreign investors: Foreign investors have pulled out more than Rs 16,000 crore from the cash segment in July on fears of deepening slowdown and also due to the effects of the “super-rich” tax proposed in the Union Budget 2019 on foreign portfolio investors (FPI). This has weakened sentiment and weighed heavily on Indian stock markets.