Stocks tumbled on Tuesday with benchmark indices falling like a pack of cards over worries of a possible exit of Greece from the eurozone and a global recession indicated by the ongoing meltdown in oil prices. .
The Sensex (benchmark index of the BSE) dipped by 854.86 points or 3.07 per cent to close at 26987.46. The index was dragged down by oil & gas stocks with a fall of 4.17 per cent, followed by realty 3.66 per cent and metal 3.49 per cent.
Markets have fallen for a variety of reasons concerning local and international factors. While falling crude oil prices had a welcome relief for India, it is affecting those countries whose economy is surviving on crude oil. Some of these countries, with large investible surplus, have been traditional investors globally. With crude prices at record low, funds from these countries would not flow to global markets.
Global oil prices fell by over 50 per cent since last June to below $50 per barrel on January 5, 2015, a dramatic drop reminiscent of the 1998 fall in oil prices, which led to Russian default, shaking the global financial system.
Further, the financial crisis in Europe concerning Greece seems to be escalating leading to global sell off. “The underlying fear is that Euro, as a currency union, may break up,” said Arun Kejriwal, a leading equity analyst. According to him, markets needed a correction and it has happened. “Markets are likely to fall some more but important events like Vibrant Gujarat where the Prime Minister will play host along with the Gujarat Chief Minister for the first time, is less than a week away,” said Mr. Kejriwal, adding, “with global business leaders visiting the event, important announcements are expected,” which are likely to trigger markets.
While all sectoral indices fell sharply, broader indices too dipped as BSE 100 recorded a loss of 2.96 per cent and mid-cap and small-cap stocks lost 2.95 per cent each.
On the National Stock Exchange (NSE), the 50-share Nifty lost by 251.05 points or three per cent at 8127.35.
“Sharp sell-off on Wall Street on Monday was seen plaguing Asian and European markets”, said Kiran Kumar Kavikondala, Director & CEO, WealthRays Securities.
Euro zone also posted weak PMI data suggesting slowdown in economy, said Mr. Kavikondala.
Indian services PMI (Purchasing Managers’ Index) for December stood at 51.1 further weighing on the index. Metal stocks were down on fears of China slowdown.
Banking saw sell off ahead of the U.S. Federal Open Market Committee (FOMC) minutes, expected on Wednesday, which will provide cues on U.S. Federal Reserve’s view of U.S. monetary policy normalisation,” Mr. Kavikondala added.
PTI reports
Rupee loses 16 paise Tracking a steep fall in stock markets, the rupee on Tuesday washed out initial gains and ended with a loss of 16 paise at over one week low of 63.57 against the greenback.
Besides, the euro sank against the dollar to the lowest level in nearly nine years as investors worried about a possible Greek exit from the eurozone and sliding oil prices. Traders said this also weakened the rupee sentiment amid sustained dollar demand from importers, including oil firms.
At the inter-bank foreign exchange market, the domestic unit commenced better at 63.37 a dollar against its previous close of 63.41. It then improved further to a high of 63.30. Later, the rupee met with strong resistance following crash in local stocks and hit a low of 63.62 before concluding at 63.57, a net fall of 16 paise or 0.25 per cent. This is its weakest close since 63.67 on December 29, 2014. On Monday, the rupee lost 12 paise or 0.19 per cent.
