Sensex Crashes 1100 Points; Down 8000 Points In Just Two Months - Factors Behind D-Street Bloodbath

The Indian benchmark indices, Sensex and Nifty50 on Wednesday closed sharp in red territory amid the cyclical earnings slowdown and global cues which dampened investor sentiments. 

What is the situation?

The Nifty50 closed in red at 23,559.05 with a drop of 1.36 per cent and the BSE Sensex closed at 77,690, with a drop of 1.25 per cent. The markets on Wednesday experienced the fourth consecutive day of decline. The low numbers extended across the stock market, and small and midcap stocks experiencing steep losses have perturbed investors.

Why is this happening?

The Rupee is at an all-time low, "It appears that the rupee has established support around the current levels, with depreciation limited near 84.50," CR Forex Advisors MD Amit Pabari said to ANI. The low exchange rate has a cascading impact on investor sentiment, leading to FII outflows and consequently impact on the market. "Two strong factors have been at play in this consolidating market. One, the relentless selling by FIIs has been favouring the bears and pulling the market down. Two, the sustained buying by DIIs has been supporting the market preventing a crash in the market. How the market will trend in the coming days will depend on the relative strength of these two factors," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services to ANI.

FIIs sold Rs 2,026 crore on November 11, although the intensity of selling is gradually reducing. Domestic institutional investors (DIIs) continue to support the market with robust mutual fund inflows, which surged to a record Rs 41,887 crore in October."The current downward movement in the market is not a flash dip and is driven by some serious macro concerns. The INR is depreciating against the dollar and was at its all-time low today. Despite our GDP 's growth, private investors are struggling to keep up with their previous growth rates. Amid this, several large and medium-sized companies have reported weak quarterly results, disappointing investors. This weak performance is among the key factors in accelerating the exodus of funds from the secondary market," said VLA Ambala, Co-Founder, Stock Market Today to ANI.

The US elections are also a reason behind the market downfall. Before Donald Trump became president-elect, there was massive uncertainty in the market. The market was on the edge given that election results could swing either way.