The 30-share BSE index fell 1,046 points, or 1.99 per cent, to end at 51,496; While the broader NSE Nifty closed 332 points or 2.11 per cent lower at 15,361.
Tata Steel, Tech Mahindra, Bharti Airtel, Wipro and IndusInd Bank were the top losers in the Sensex pack, falling 6.04 per cent. 29 out of 30 stocks ended in the red.
Nestle was the only winner in the BSE index, closing with a marginal gain of 0.3 per cent.
All sub-indices closed in the red with Nifty Metal, Media, Realty falling up to 5.24 per cent on the NSE platform.
All major sell-offs wreaked havoc on major indices, with major indices Reliance Industries and HDFC twins contributing the most to the fall.
Both Sensex and Nifty have now hit a new 52-week low. The stock market has been under pressure since Russia’s attack on Ukraine in February.
Uncertainty amid the ongoing geopolitical crisis had accelerated inflation in the world’s major economies. All this is happening at a time when the country was slowly recovering from the slowdown caused by the Kovid-19 pandemic in the last two years.
Investors lost Rs 5.54 lakh crore in Thursday’s session, with the market capitalization of all BSE-listed firms at Rs 2,39,20,631.65 crore.
S Ranganathan, Head of Research, LKP Securities said, “A look at the stocks hitting one-year lows today reflects the riskier mood on the road as a handful of FMCG stocks showed green tick among the frontliners.” ,
Here are some factors that have taken the markets to one-year lows:
* Ukraine War
The escalating crisis in Ukraine dragged down stock markets around the world. The BSE Sensex has fallen over 5 per cent since February 24, when Russian troops invaded Ukraine.
The uncertainty surrounding the crisis left investors nervous and their priorities shifted towards safe havens as they gave up on riskier stocks.
As a result, investors lost over Rs 3 lakh crore as the market capitalization of BSE listed companies fell to Rs 239 lakh crore today as compared to Rs 242 lakh crore on February 24.
* FII Sailing
Foreign institutional investors (FIIs), once known as the drivers of stock markets in India, are abandoning domestic stocks amid weak global sentiments.
In fact, June is the 9th consecutive month that FIIs remained net sellers, leaving F shares worth over Rs 31,000 crore so far.
* global market
Not just in India, the sentiment has been weak in global stock markets.
The S&P500 in the US confirmed to be in a bear market 2 days ago. This is the second time in two years that Wall Street is in the grip of bears. The barometer is down about 22 per cent from its peak set earlier this year.
In addition, foreign investors have pulled money out of emerging Asia for five consecutive months, excluding China, worried about inflation and reluctance to raise rates in the region due to slowing global growth.
*inflation increased
The war in Ukraine has boosted food and energy prices as the fighting disrupts shipments of oil, natural gas, grain and cooking oil. This is adding to the price hike that began last year as the global economy began to recover from the Covid-19 pandemic.
While post-pandemic global demand, extreme weather, tight food stocks, high energy prices, supply chain bottlenecks and export restrictions and taxes have been straining the food market for two years, all of these factors have been addressed after Russia’s invasion. The recent convergence is unprecedented and has accelerated the rate of food inflation around the world.
India’s consumer price index (CPI)-based inflation for May came down to 7.07 per cent on rise in edible oil and fuel prices. Retail inflation has remained above the Reserve Bank of India’s (RBI) comfort zone of 6 per cent for the fifth consecutive month.
Whereas wholesale price-based inflation remained in double digits for 14 consecutive months, rising to 15.88 per cent in May.
The war has also forced India to halt grain exports to cope with rising prices and avoid potential shortages in the country’s second largest producer of wheat.
*Energy market in chaos
Russia’s invasion of Ukraine and the resulting international backlash have thrown energy markets into chaos, threatening dire economic consequences that rival the oil shocks of the 1970s.
Sudden economic isolation is shutting down a major global source of energy, metals and crops. It is jeopardizing Russia’s very foundations and creating fears that the developed world has not faced in decades – rapid inflation and real energy shortages.
It’s not just energy. Wheat rose to its highest level since 2008, above 400 euros a tonne in Paris, as the Ukraine war cut nearly a quarter of world exports. Aluminum broke a record above $3,800 a tonne on the London Metal Exchange and copper closed at an all-time high last month.
All eyes on US Fed’s decision
Inflation in the US, which had been under control since the early 1980s, resumed with a vengeance a year earlier, largely as a result of the economy’s unexpectedly strong recovery from the pandemic slowdown.
The Fed started raising rates three months ago.
On Wednesday, the Fed raised its policy interest rate by 75 bps. Since 1994, the central bank has raised its prime rate this much in one go.
US Federal Reserve Chairman Jerome Powell has promised to do whatever it takes to curb inflation, which is now at a four-decade high and defying the Fed’s efforts so far.
*The fear of recession is looming*
Investments of all kinds, from bonds to bitcoin, have fallen this year as high inflation forces central banks to try to slow inflation, which has risen as it recovers from the disruptions of the pandemic. The war in Ukraine has added to those price pressures.
Powell said on Wednesday that the Fed is moving “rapidly” to bring rates closer to normal levels after last week’s surprise report in which consumer-level inflation unexpectedly accelerated last month, raising hopes Inflation may already be at its peak.
However, he also indicated that the rate hike may ease later this year. This appears to assuage fears that the central bank may be overstepping its target of cooling inflation and propelling the economy into recession.
The Fed is “no longer trying to induce a recession, let’s be clear about that,” Powell said. He called Wednesday’s big increase “front-end loading.”
Even without a recession, high interest rates hurt prices for investments. The hardest hit are those that have risen the most in the easy-money era of ultra-low interest rates, including high-growth technology stocks and cryptocurrencies.
*Rate hike by RBI
Reserve Bank of India (RBI) hiked its key policy rates after a gap of more than 2 years. The repo rate has increased by 90 basis points (bps) in the last 2 months and is now at 4.9 per cent.
Food and fuel are the two main sources of inflation in India and the supply disruptions due to Russia’s invasion of Ukraine, uncertain weather and export restrictions have driven up most food prices in recent months.
India meets two-thirds of its vegetable oil demand from imports. Sunflower oil imports from the Black Sea region have been crippled by the war, while palm oil supplies have been disrupted by Indonesia’s export restrictions.
* draw money
The rupee on Wednesday hit a new record low of 78.22 against the US dollar as a weak trend in domestic equity markets and continued outflow of foreign funds weighed on investor sentiment.
The domestic currency has now closed at a record low for four consecutive sessions.
Emkay Global Financial said, “Rising crude oil prices have also added to the rupee’s distress as Brent crude oil prices hit a three-month high of $125.14 a barrel on Tuesday. The breach of the 78.30 level was on the back of the rupee,” Emkay Global Financial said. Will push up the depreciation to the level of 78.55/78.75.” services said.
However, the dollar index fell from its highs after the Federal Reserve raised interest rates by 75 basis points and forecast a slowing economy and rising unemployment in the coming months, traders said.
The rupee on Thursday closed 12 paise higher at 78.10 (provisional) from its record low against the US currency, tracking an overnight weakness in the dollar and fall in crude oil prices.
*covid uncertainty*
After the second severe wave of covid, India saw 2 more waves from last year. However, neither of them was as intense as in May 2021.
When the third wave hit in December-January, states resorted to partial lockdown and commercial activities being done physically were banned. As a result, the Omicron version stirred up sentiments.
The BSE Sensex last touched its record peak in October 2021, when it crossed the 62,000 mark. The market has been under pressure since then.
Some relief was seen in early February, but it was short-lived as Russia’s invasion of Ukraine made matters worse.
(with inputs from agencies)