Monday mayhem in markets: The benchmark BSE Sensex crashed over 850 points in late afternoon trade on Monday, finally closing at 64,572, down 826 points. The benchmark index closed 1.26% down and also gave up its 65,000 level. The broader market index Nifty 50 was also down over 1.36% and closed at 19,282, having slipped 261 points. The blood bath on the Dalal Street was largely driven by the global cues. While the 10-year US Treasury yield surpassed 5%, the ongoing Israel-Hamas war also hurt sentiments.
According to an ET report, the stock market crash of Monday resulted in a loss of approximately Rs 7.56 lakh crore in investor wealth. The BSE market capitalization dropped to Rs 311.33 lakh crore.
ICICI Bank, which gained due to good Q2 results, also dipped marginally closing at Rs 931, down 0.18%. ICICI Bank beat the quarterly estimates of analysts to post an almost 36% jump in its net profit for the quarter ended September 30. The ICICI Bank stock has the third-highest weightage in the benchmark. All the 13 major sectors logged losses.
Umeshkumar Mehta, chief investment officer at Samco Mutual Fund, told Reuters that there are several mid cap and small cap stocks where liquidity is a concern. “When liquidity is good like it has been so far, the going is good. But when the tide turns, it’s a double-edged sword,” Mehta was quoted as saying. Mehta is of the view that the Indian equities are likely to consolidate till concerns on the ongoing geopolitical conflict don’t ease.
Domestic headline indices have fallen due to several key factors as listed out by ET:
- US Bond Yields: On Monday, the yield on the 10-year US Treasury note surpassed 5%, reaching a level not seen since July 2007. This surge in yields is attributed to investors factoring in robust US economic growth and fiscal concerns. The 10-year yield reached 5.004% on Monday, marking an 8 basis point increase for the day and briefly hitting a 16-year high of 5.001% last Thursday. Overall, it has risen by 160 basis points since mid-May.
- Israel-Hamas war: The increased risk of a wider conflict in the Middle East negatively impacted market sentiment, leading to a decline in stock indices across Asia and Europe. On Saturday, Israel announced its plans to escalate its military operations in the Gaza Strip as part of its ongoing conflict with Hamas. Israel’s military spokesperson advised Gaza City residents to move south for their safety.
- Oil prices: Despite a slight drop in oil prices on Monday, they remained above the $90 threshold. Brent crude futures dipped by 0.26%, or 24 cents, to reach $91.92 per barrel. Meanwhile, US West Texas Intermediate crude futures decreased by 0.41%, or 36 cents, to $87.72 per barrel.
- Global markets: Stocks experienced a widespread decline as the 10-year Treasury yield exceeded 5%, raising worries about the potential impact of rising borrowing expenses on economic growth. The 10-year yield increased by nine basis points to 5.01%, marking its highest level since 2007. In Europe, the Stoxx 600 index dropped by 0.8%, reaching its lowest intraday point since March. S&P 500 equity futures also declined by 0.6%.
