Why Sensex crashed 1,100 points today
What's the story
India's benchmark stock market indices, the Sensex and Nifty, witnessed a major crash on Thursday. The S&P BSE Sensex tanked nearly 1,100 points or 1.44% to close at 74,775.74 while the NSE Nifty50 fell by 359 points or 1.5% to settle at 23,547.75. The fall was largely due to concerns over a below-normal monsoon forecast and uncertainty over the US-Iran conflict situation.
Market response
Below-normal monsoon forecast triggers inflation concerns
The India Meteorological Department (IMD) has predicted a below-normal monsoon this year, with rainfall expected to be 90% of the Long Period Average (LPA). This prediction has sparked fears of potential agricultural losses and food inflation. The uncertainty over a sustainable peace agreement between the US and Iran, despite ongoing diplomatic efforts, also contributed to investor caution.
Market trends
Broader market indices and sectoral performance
The market witnessed a broad-based sell-off with the Nifty Midcap 100 and Nifty Smallcap 100 falling by 1.33% and 0.85%, respectively. The India VIX, a measure of market volatility, jumped by an alarming 8%. Most sectoral indices ended in the red with Nifty Oil & Gas leading the losses at -2.47%. Other sectors such as Metal (-2.02%), Auto (-1.96%), Healthcare (-1.86%), and Consumer Durables (-1.62%) also witnessed declines while IT was an exception gaining by 0.6%.
Stock analysis
Top gainers and losers in Sensex
Among Sensex stocks, Tech Mahindra emerged as the top gainer with a rise of 1.86%. Other gainers included HCL Technologies (+1.65%) and Larsen & Toubro (+1.07%). Power Grid Corporation was the worst performer with a fall of 3.46%. Other laggards included Indigo (-3.27%), NTPC (-2.86%), Mahindra & Mahindra (-2.72%), and Tata Steel (-2.72%) among others, who witnessed heavy selling pressure on their shares today.
Currency performance
Indian rupee gains significantly amid equities rout
Despite the sharp fall in equities, the Indian rupee strengthened significantly. The currency ended at 95 against the US dollar, gaining 0.7% during the day and recording its biggest single-day rise since April 2. Vinod Nair of Geojit Investments Limited attributed the drop to broad-based selling pressure. He said that fears of deficient rainfall, combined with an El Nino weather pattern and high fuel prices, could trigger a spike in food inflation later this year.