Sensex tumbles over 700 points: 5 key triggers behind Rs 5L cr wealth erosion
Benchmark indices Sensex and Nifty came under heavy selling pressure on Tuesday, wiping out nearly Rs 4.57 lakh crore in investor wealth as the market capitalisation of BSE-listed companies fell to around Rs 475 lakh crore. Weak global cues such as a massive crash in the Kospi and a sharp selloff in technology stocks, weighed on sentiment.
At the day's low, the 30-share Sensex dropped over 650 points, to trade below 76,500 level, while the Nifty50 declined over 200 points, slipping below the 23,900 mark. Infosys, TCS, Tata Steel, Tech Mahindra, and Adani Ports were among the biggest losers on the BSE, falling as much as 3.5% in afternoon trade.
Here are the key factors behind the market decline:
1) Kospi crash
South Korea's benchmark Kospi index witnessed a steep selloff on Tuesday after recently scaling record highs. Investors rushed to book profits in semiconductor heavyweights amid concerns that valuations had become stretched following the market's strong rally. The Kospi slumped as much as 10%, with SK Hynix falling over 12% and Samsung Electronics dropping nearly 13%. The Korea Exchange halted trading for 20 minutes after market-wide circuit breakers were triggered.
The correction comes after the index had surged to fresh all-time highs earlier this month and crossed the 9,000 mark for the first time, as investors looked past uncertainties related to the Iran conflict. Sentiment toward technology stocks weakened further after losses in U.S. tech names during Monday's session, with investor focus now turning to Micron Technology's quarterly earnings due later this week.
2.) US Fed rate hike fears
Higher oil prices emanating from the Middle East conflict have renewed concerns about inflation, strengthening expectations that interest rates could remain elevated. According to the CME FedWatch Tool, traders now assign an 88% probability to a Federal Reserve rate hike in December, up from 61% before last week's Fed meeting.
Higher interest rates in the US can potentially lead to foreign outflows from the Indian capital market as higher yields across US treasuries offer attractive returns for foreign investors. Higher bond yields in the US also reduce the attractiveness of Indian bonds for foreign investors.
3.) IT stocks selloff resume
After a brief respite on Monday following last week's sharp selloff, IT stocks came under renewed pressure on Tuesday, with TCS, Infosys, Wipro and HCLTech falling at least 3% each amid mounting concerns over AI-led disruption and slowing technology spending.
The latest round of selling was triggered after Accenture trimmed the upper end of its annual revenue growth guidance, reviving worries about weak discretionary spending by global enterprises. While investments in areas such as artificial intelligence and cybersecurity remain resilient, companies continue to hold back on broader IT consulting and digital transformation projects.
Accenture's commentary has added to investor concerns that demand recovery may take longer than expected. The outlook is particularly significant for Indian IT firms, which generate a large share of their revenue from North America and often compete with Accenture for major digital transformation contracts.
4.) Rupee slide
The Indian rupee fell 0.16% versus the U.S. dollar to 94.8275, tracking a slump in Asian stocks, and as rising expectations of Federal Reserve rate hikes this year kept traders wary of going long on the South Asian currency.
At the day's low, the 30-share Sensex dropped over 650 points, to trade below 76,500 level, while the Nifty50 declined over 200 points, slipping below the 23,900 mark. Infosys, TCS, Tata Steel, Tech Mahindra, and Adani Ports were among the biggest losers on the BSE, falling as much as 3.5% in afternoon trade.
Here are the key factors behind the market decline:
1) Kospi crash
South Korea's benchmark Kospi index witnessed a steep selloff on Tuesday after recently scaling record highs. Investors rushed to book profits in semiconductor heavyweights amid concerns that valuations had become stretched following the market's strong rally. The Kospi slumped as much as 10%, with SK Hynix falling over 12% and Samsung Electronics dropping nearly 13%. The Korea Exchange halted trading for 20 minutes after market-wide circuit breakers were triggered.
The correction comes after the index had surged to fresh all-time highs earlier this month and crossed the 9,000 mark for the first time, as investors looked past uncertainties related to the Iran conflict. Sentiment toward technology stocks weakened further after losses in U.S. tech names during Monday's session, with investor focus now turning to Micron Technology's quarterly earnings due later this week.
2.) US Fed rate hike fears
Higher oil prices emanating from the Middle East conflict have renewed concerns about inflation, strengthening expectations that interest rates could remain elevated. According to the CME FedWatch Tool, traders now assign an 88% probability to a Federal Reserve rate hike in December, up from 61% before last week's Fed meeting.
Higher interest rates in the US can potentially lead to foreign outflows from the Indian capital market as higher yields across US treasuries offer attractive returns for foreign investors. Higher bond yields in the US also reduce the attractiveness of Indian bonds for foreign investors.
3.) IT stocks selloff resume
After a brief respite on Monday following last week's sharp selloff, IT stocks came under renewed pressure on Tuesday, with TCS, Infosys, Wipro and HCLTech falling at least 3% each amid mounting concerns over AI-led disruption and slowing technology spending.
The latest round of selling was triggered after Accenture trimmed the upper end of its annual revenue growth guidance, reviving worries about weak discretionary spending by global enterprises. While investments in areas such as artificial intelligence and cybersecurity remain resilient, companies continue to hold back on broader IT consulting and digital transformation projects.
Accenture's commentary has added to investor concerns that demand recovery may take longer than expected. The outlook is particularly significant for Indian IT firms, which generate a large share of their revenue from North America and often compete with Accenture for major digital transformation contracts.
4.) Rupee slide
The Indian rupee fell 0.16% versus the U.S. dollar to 94.8275, tracking a slump in Asian stocks, and as rising expectations of Federal Reserve rate hikes this year kept traders wary of going long on the South Asian currency.
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