Sensex plunges 551 pts, hits 3-month low; Nifty ends at 10,851; factors that weighed on market

NEW DELHI: The domestic stock indices Sensex and Nifty plunged to their three-month low levels on Wednesday plagued by crashing rupee and surging crude oil prices. Investors were also cautious as the Reserve Bank of India’s MPC began its three-day policy meet today.

A falling rupee and surging crude fanned fears of increase in inflation.

BSE benchmark Sensex closed at 35,975.63, down 550.51 points, or 1.51 per cent. The NSE barometer Nifty ended 150.05 points, or 1.36 per cent lower at 10,858.25.


In the 30-share index only five stocks ended higher. Mahindra and Mahindra was the worst performer and shed 6.6 per cent to close at Rs 791.15 apiece. YES Bank was the best performer and gained 5.79 per cent.

For every four declines, five stocks advanced on BSE.

Midcap and smallcap stocks outperformed benchmark Sensex. BSE Midcap index shed 1.11 per cent while BSE Smallcap pack gained 0.20 per cent.

Besides metals most of the major indices were trading in the red. Auto index was the worst sectoral performer. Fall in Eicher Motors and Mahindra & Mahindra led the auto index lower.

Among other sectors that witnessed heavy selling pressure were -- banking, financials, FMCG and IT.

Here are the factors that caused the market fall:

1. Rupee rout
The domestic rupee nosedived to a fresh record low on Wednesday, breaching the 73-mark against the US dollar for the first time ever. The domestic unit hit an all-time low of 73.41 intraday, 50 paise down from Monday's closing level of 72.91. At the time of writing this report, the domestic currency was trading at 73.24 against the greenback.

Sajal Gupta, Head Forex and Rates, Edelweiss Securities said, “Market has not reacted positively to steps taken by government for stability in rupee as they were perhaps not strong enough to address the key issue of short term demand. Most of the Asian and emerging currencies are calmer in past one month. Market is reacting strongly to brent crude movements and with current pace 75 can likely be seen if crude touches 88-90 levels.”

2. Oil on boil
The oil prices traded above the $85 per barrel fuelling risks of a further increase in India's import bill.

Oil traded near a four-year high, supported by expectations that US sanctions on Iran will tighten supply and strain the ability of Saudi Arabia and other producers to pump more. Crude exports from Iran, Opec's third-largest producer, are already falling as the US sanctions kicking in on November 4 deter buyers. The drop in exports is reducing the impact of an Opec production increase agreed in June, Reuters reported.

Brent crude, the global benchmark, was up 38 cents at $85.18 a barrel at 0833 GMT, it added.

3. Infra sector growth slows down
Growth of eight infrastructure sectors slowed down to 4.2 per cent in August on account of decline in production of crude oil and fertiliser. The core sectors had expanded by 7.3 per cent in July 2018, according to a PTI report.

The growth rate of eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity was 4.4 per cent in August 2017.

4. Weakness in global markets
Asian markets ended mostly lower on Wednesday as investors fretted about Italy’s budgetary spending and a controversial clause in the new US-Mexico-Canada trilateral pact put the focus back on the Sino-US tariff dispute. The US-China trade dispute is unlikely to be resolved anytime soon as a provision in the new US-Mexico-Canada trade agreement gives the Trump administration an effective veto over any China trade deal by Canada or Mexico.

Japanese shares ended lower as the weak yen trend paused on concerns over Italian finances and automakers skidded after posting weak US sales data. Hang Seng, Jakarta Composite, KLSE Composite, Nikkei 225 and Taiwan Wighted index dipped 0.66 per cent, while Straits Times gained 0.76 per cent.