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Sensex tanks 642 pts, Nifty below 10,850; 5 factors that weighed on D-Street

Almost all sectoral indices traded in the red, led by auto that was down 1.75 per cent.|
Updated: Sep 17, 2019, 09.12 PM IST
Sensex cracks 642 pts; key factors behind market's pain
Sensex cracks 642 pts; key factors behind market's pain
By Shubham Raj

The bears tightened their grip on Dalal Street on Tuesday as benchmark indices fell over a per cent as crude oil prices continued to gain in the aftermath of drone attacks on Saudi Arabia oil establishments. A poor set of macro data from China also further hit sentiment.

BSE Sensex tumbled 642.22 points, or 1.73 per cent lower, at 36,481.09, while NSE Nifty ended at 10,817.60, down 185.90 points or 1.69 per cent. Volatility Index India VIX also spiked about 7.12 per cent to 16.01.

In the 30-pack Sensex, 3 stocks ended in the green and 27 in the red with Hero MotoCorp finishing as worst performer and HUL the best. Tata Steel, Tata Motors, Axis Bank and Maruti Suzuki too joined Hero MotoCorp on the losers’ list, slipping up to 7 per cent.

Infosys and Asian Paints were among the other Sensex stocks that advanced.

The BSE Midcap index declined 1.77 per cent and the BSE Smallcap index slipped 1.84 per cent, underperforming benchmark Sensex.

BSE Auto index recorded 3.80 per cent loss on the sectoral return chart followed by Realty, Metal and Bankex index.

In terms of index contribution, Infosys, HUL and Asian Paints were chart toppers while HDFC twins, ICICI Bank, RIL and Axis Bank were the top drags on Sensex.

Yogesh Mehta, Founder of Yield Maximiser said that worries over crude oil spike and its further impact on current account and fiscal deficit hit the market.

Here are five reasons behind Sensex’s fall today:

Saudi oil crisis: Monday’s record rise in Brent Crude futures severely hit market sentiment. Despite prices holding steady on Tuesday, the uncertainty around adequate oil supply remained.

Attack on two Saudi oil facilities halved the kingdom's output, which now threatens the global demand-supply balance.

The US being on wait and watch mode on whether to tap its Strategic Petroleum Reserve also didn’t help the sentiment.

"With regard to energy markets, the president has directed me to release oil from the Strategic Petroleum Reserve if that is needed to offset any potential disruptions," Energy Secretary Rick Perry told reporters on a visit to Vienna on Tuesday. "But looking at the supply numbers we are confident that the markets remain well-supplied."

Technical: Formation of a death cross on daily charts on Monday also led to the fall in the stock market. The formation hints at more short term pain for Nifty. In the ‘Death Cross’, short-term moving averages (typically, 50-day moving average) of a stock or index cross below its long-term moving averages (usually 200-day moving average), and such a pattern generally points to further weakness for the stock or index.

Global Cues: On the global front, Asian shares closed lower while European stocks were trading flat in morning trade as investors remained on the sidelines ahead of this week's Federal Reserve meeting where the Fed is expected to cut interest rates for the second time this year. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.66 per cent.

China woes: China’s industrial growth rate slumped to a 17-year low, indicating all was not well in the manufacturing hub. US import tariffs and softening domestic demand were major reasons behind this. Industrial output growth slowed to 4.4 per cent in August, registering the slowest pace of expansion since February 2002.

Auto stocks tumble: Nifty Auto index closed 3.83 per cent lower, led by a slump in Hero MotoCorp, Tata Motors and Maruti Suzuki, among others. Out of the 15 constituents in the index,all were trading in the red.

“Surge in crude oil prices may be the reason behind crash in auto stocks,” said Gautam Duggad, Head Of Research - Institutional Equities at Motilal Oswal Financial Services.

Fed meet: Investors were also edgy ahead of the outcome of the Federal Reserve policy meet. Market analysts are expecting a rate cut, however, there are concerns that the central bank may wait for more data before deciding to ease policy rates.

US President Donald Trump has been demanding aggressive rate cuts for a while now. “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term,” he tweeted on last week.

Also Read

FPIs cover record numbers of Nifty shorts

Nifty enjoys strong support at 11200-11100

Analysts recommend Short Straddle play on Nifty

Charts show Nifty Smallcap Index readying to play catchup with Nifty

Nifty's key short-term target is at 11,470

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