Falling for the 6th straight session on Friday, the 30-share BSE index fell 135 points or 0.26 per cent to close at 51,360. While, the broader NSE Nifty settled 67 points ot 0.44 per cent lower at 15,293.
During the week, the sensex plunged 2,943.02 points or 5.42 per cent, and the Nifty shed 908.30 points or 5.61 per cent.
Both the indexes touched more than one-year lows after six straight session of losses.
In the last 10 days, the benchmark BSE lost 4,315 points and is just a little over 1,500 points, or 2.5 per cent, away from entering the bear territory of a 20 per cent slide from the all-time high.
Sensex drops over 17% from peak
The BSE sensex was scaling record peaks in almost every session from July-October 2021. In October, it touched an all-time intra-day high of 62,245.
From there, the benchmark index has plunged 17.48 per cent today.
It is down over 10,000 points since the October peak.
If we calculate from then, investors have lost Rs 37.91 lakh crore.
Markets were in correction in November-January but matters became worse after Russia’s invasion of Ukraine in February.
The uncertainty surrounding this crisis made investors jittery and their preferences shifted towards safe haven assets as they dumped riskier stocks.
As a result, investors lost over Rs 5 lakh crore as the market capitalisation of BSE listed companies fell to Rs 236 lakh crore today as compared to Rs 242 lakh crore on February 24.
What led to this fall
The uncertainty amid the ongoing geopolitical crisis had caused a spike in inflation across major economies of the world. All this at a time when countries were gradually recovering from the slump caused by Covid-19 pandemic in the last 2 years.
The war in Ukraine has boosted food and energy prices as the fighting disrupts shipments of oil, natural gas, grain and cooking oil. That is adding to price increases that began last year as the global economy started to recover from the Covid-19 pandemic.
While post-pandemic global demand, extreme weather, tightening food stocks, high energy prices, supply chain bottlenecks and export restrictions and taxes have been straining the food market for two years, the recent convergence of all these factors following Russia’s invasion is unprecedented and has sent food inflation rates spiking around the world.
Inflation has soared to 40-year high in the US, forcing the Federal Reserve to hike interest rates. The Fed on Wednesday raised its key rate by 75 basis points and officials outlined a faster pace of rate hikes. The Bank of England and the Swiss National Bank also raised borrowing costs.
In India as well retail inflation is at 7.09 per cent, while WPI remained in double digits for 14 straight months. This forced the RBI to hike interest rates by 90 bps in last 2 months, thereby making investors jittery.
Besides, analysts have said selling by foreign investors and fears of damage to economic recovery from aggressive monetary policy tightening were also causing jitters in the market.
Foreign investors have withdrawn a net $3.64 billion from Indian equities this month after selling a net $5.18 billion in May.
“For the last few weeks, the capital market has witnessed substantial outflows. On the global front, the US Fed hiked the interest rates by 75 bps which was expected to somehow control the current scenario. The RBI has taken proactive measures by trying to balance the ongoing surge in inflation and growth.
“Considering the increase in capital expenditure and better credit growth for the banks, India’s economy is considered to be less risky as compared to other emerging markets in the long term. The foreign institutions surely have more faith and confidence in India’s growth story and the current exodus of cashflows will eventually slow down over the coming weeks,” Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India told PTI.
(With inputs from agencies)