Benchmark indices crashed in trade today with the Nifty falling below 11,000 mark for the first time since March 2019. Sensex too fell below the 37,000 level in afternoon trade signalling weakness in the market. While Sensex lost 787 points intra day to 36,694, Nifty fell over 200 points to 10,915. Later, Sensex closed 462 points lower at 37,018 and Nifty lost 138 points to 10,980.
Sensex and Nifty have lost 7.04% and 7.09% during the last one month, respectively. Sensex and Nifty have lost 2.53% and 2.90% in last one week.
Here's a look at why Sensex and Nifty fell in afternoon trade today.
Uncertainty on future rate cuts by Federal Reserve
The US central bank cut its key interest rate for the first time in a decade on Wednesday. The Federal Reserve's quarter-point cut was widely expected but Chairman Jerome Powell disappointed investors by saying at a news conference the central bank had no plans for a long cycle of lowering interest rates. He called Wednesday's cut a "midcycle adjustment." This spooked US and Asian markets.The Shanghai Composite Exchange lost 0.8% to 2,909.75 and Hong Kong's Hang Seng shed 0.7% to 27,580.21. Sydney's S&P-ASX 200 lost 0.3% to 6,793.20 and benchmarks in New Zealand, Taiwan and Southeast Asia also retreated. South Korea's Kospi gained merely 3 points to 2,028.44.
On Wall Street, Standard & Poor's 500 had its worst day in two months, falling 1.1% to 2,980.38. The index had hit an all-time high on Friday. The Dow Jones Industrial Average lost 1.2% to 26,864.27. The Nasdaq composite fell 1.2% to 8,175.42.
Weak auto sales
Auto firms logged weak sales for July which affected market sentiment. Maruti Suzuki sold 1.09 lakh units in July 2019, the lowest in last two-years, down by 33.5 percent compared to 1.64 lakh units sold in the same period of previous year.Mahindra & Mahindra auto sales fell 15 percent to 40,142 units on a yearly basis while its tractor sales fell 12 percent to 19,992 units.
TVS Motor's July sales fell 13 percent to 279,465 units. TVS shares fell as much as 3.8 percent to Rs 354 after the sales update.
Bajaj Auto sales fell for the first time in two years. The company logged 5 percent year-on-year decline in total sales to 3.81 lakh vehicles last month. Escorts sold 4,860 tractors in July, a decline of 13.4 percent from the year-ago month, according to its exchange filing. Its share price fell as much as 4 percent to Rs 451.10 each.
Crisil cuts India's GDP growth estimate
Credit rating agency Crisil has lowered gross domestic product (GDP) growth forecast for India by 20 basis points to 6.9 per cent for this fiscal, citing weak monsoon and slowing global growth. Sluggish GDP data for the first quarter was also taken into account for lowering India's growth estimates. This also led the stock market lower in afternoon trade.
Burgeoning fiscal deficit
Fiscal deficit in the first three months of financial year 2019-20 widened to Rs 4.32 lakh crore, or 61.4 per cent of the budgetary target. The deficit was 68.7% in the year-earlier period. The government has retained the fiscal deficit target of 3.4 per cent of the GDP, or Rs 7.03 lakh crore for the ongoing financial year. Fiscal deficit is the difference between government's earnings and expenditure. It excludes money from borrowings.
The rupee tumbled 41 paise to 69.20 against the US dollar today amid unabated foreign fund outflows and rising crude oil prices. Forex traders said though the US Federal Reserve cut the benchmark lending rate on Wednesday for the first time in more than a decade, market participants reacted to Fed Chair Jerome Powell statement which indicated dampened hopes of further rate cut. The fall in domestic currency dampened sentiment on bourses.
Edited by Aseem Thapliyal