D-St investors lose Rs 6 lakh crore in selloff! 6 factors behind the fall

New Delhi: Domestic equity market benchmark BSE Sensex dropped 1,093.22 points to settle below the 59,000 mark, while NSE's Nifty50 index cracked below the 17,550 mark.

Domestic investors lost over Rs 6 lakh crore from their kitty as the total market capitalisation of BSE-listed firms plunged from Rs 285.9 lakh crore from Rs 279.8 lakh crore during the session.

Also read: Nifty logs worst week in three months

Here are a host of factors that dragged the markets lower:

Global weakness
Weakness in the global markets pushed the Indian benchmark indices lower. Asian peers including Nikkei, Kospi and Hang Seng were trading with big cuts, following a weak trading session in the US stocks overnight.

Asian stocks headed for a fifth week of declines following more weakness in US equities and as investors braced for a US rate hike next week amid growing concerns of a global recession following warnings from the World Bank and the International Monetary Fund, said Deepak Jasani, Head of Retail Research, HDFC securities.

After a solid decline in last two session, US stock markets are signalling another weak session on Friday as the US Dow Jones futures were trading about 250 points lower, signaling another sell-off at open.

Rate hike fears
Traders are anticipating another rate hike, third consecutive, from the US central bank. The US Federal Reserve is likely to meet next week and may further increase interest rates to tame the rising pressure. However, some analysts believe that a one percentage point rate hike could also be cards.

Selling in index heavyweights
Index heavyweights including Reliance Industries, Infosys, HDFC twin, Tata Consultancy Services and ICICI Bank dragged the indices lower. Selling was seen across all major sectors including IT, banking, financials, metals.

Only two stocks - IndusInd Bank and Sun Pharma - were trading in green on BSE Sensex, whereas remaining 28 stocks were trading with cuts on the 30-share pack.

Weakness in rupee
The rupee depreciated by 11 paise to 79.82 against the US dollar in opening trade on Friday, tracking the strength of the American currency and a negative trend in domestic equities.

At the interbank foreign exchange market, the rupee opened at 79.80 against the greenback, then fell to 79.82, registering a decline of 11 paise over its last close. In initial deals, the local unit also touched 79.79 against the dollar.

Recession fears
The current outlook for macro-economy remains bleak on the back of looming inflationary pressures and slowdown fears, which could lead to economic recession, warned the World Bank in a report.

The global economy may face a recession next year caused by an aggressive wave of policy tightening that could yet prove inadequate to temper inflation, the World Bank said in a new report.

Technical outlook
The Nifty50 failed to hold on to 18,000 levels on Thursday and closed with a bearish candle on the daily charts. Even though the index failed to hold on to 18,000, it still managed to close above the crucial support above 17,800, a positive sign for the bulls.

The downside bias that was expected to prevail yesterday, managed to drag Nifty only as far as 17,860 vicinity, said Anand James - Chief Market Strategist at Geojit Financial Services

"The full extent of the bearish move could be revealed today," he added. While we expect dips to 17,700 to attract bargain buying, inability to clear 17,860 on the bounce could signal extended downsides, with the first objective at 17,460.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)