What made NIFTY falls 4% in 7 session?
A man looks at a screen across the road on the facade of the Bombay Stock Exchange (BSE) building in Mumbai May 16, 2014.Reuters file
The clock is ticking! The stock markets have been on a downward spiral since August 2 when the Nifty50 hit a high of 10,137 levels in intra-day, since then, the index has tanked nearly 4 percent or around 400 points to 9,737 levels in intra-day on Friday.
The benchmark index tanked over 4 percent in 7 sessions is kind of astonishing, more so because 7 sessions back it was it hit a record high.
The sharp fall has been triggered by three broad reasons — geopolitical tensions, SEBI move on shell companies and disappointing Q1 earnings. These reasons are forcing investors to move away from Asian stock and invest into less risky assets such as gold, the yen and the U.S. government bonds.
The war of words between the heads of US and North Korea have made investors jittery about the outlook of the market. Overnight, Wall Street closed sharply lower after US President Donald Trump made another provocative statement against North Korea, saying that his threat to unleash "fire and fury" on the country was not "tough enough". Taking lead from Wall Street, Asian markets also slumped on Friday. Meanwhile, the standoff between Indian and China continued in Doklam with little signs of de-escalation of military force from either side, reported Business Standard.
SEBI's ban on 'shell' companies
Markets regulator Securities and Exchange Board of India (SEBI) on Monday asked the stock exchanges to take action against the 331 banned shell companies. Out of these 331 shell companies, SEBI had already barred 169 companies from trading, and in its latest order, it asked the bourses to effectively freeze trading in the remaining 162. The move turned investors wary about harsher surveillance by the market regulator on other stocks.
Unsatisfactory Q1 earnings
While, the companies like Infosys, Titan, HDFC Bank and Reliance Industries surprised positively, many more such as TCS, Tata Motors, Bajaj Auto, Dr Reddy's, Lupin etc disappointed the Street. The net profit of a sample of 600 companies that had declared their results by Sunday, declined 2.8 percent year-on-year (YoY) in the June 2017 quarter, which is the worst in five quarters, a BS analysis revealed.
Given such developments, most analysts believe there could be more pain in store for the markets. The market is moving according to the developing geopolitical situation, and the fall is beyond anyone's control.
Since its recent all time high on August 2, investor wealth as measured by market-capitalisation (market-cap) of the Nifty 50 companies till August 10 has dipped by over Rs 1,47,600 crore, ACE Equity data show, BS reported.