Here are five reasons why BSE Sensex
dropped over 700 points today
1. Escalating
market volatility, anxiety in derivatives market: The sell-off was
triggered due to algorithmic trades, as Nifty dished below 200-day moving
average (200 DMA). India’s volatility index rose nearly 16% in today’s trade to
its highest level since February, indicating more fluctuations ahead. Foreign
institutional investors (FIIs) have been unravelling their long positions and
are simultaneously generating short positions, amounting to the already built pressure
in the market.
2. Growing
crude oil prices: India, which imports
two-third of its crude oil obligation, is directly knocked by rising crude oil
prices. Today, benchmark Brent crude touched $68.55 per barrel, up 1.5% from
its previous close. The benchmark had hit a low of $46.59 on 13 January and has
escalated 47.48% since then.
3. Frail
Asian markets and mounting sovereign bond yields: Asian stocks plunged to two-week low, dragged down by a sell-off in
global sovereign bonds, as investors were anxious it might set off profit-booking
in other asset classes. Long-term US Treasury yields rose on Tuesday to their
highest level this year, with the 30-year US bond yield rising to 2.934%, the
highest in five months and above its 200 DMA.
4.
Ongoing tax string between foreign investors and Govt: The brawl between income tax authorities and foreign portfolio investors
(FPIs) over the conservative levy of minimum alternate tax (MAT) has made
foreign investors alert. FIIs have been net sellers of Indian equities in 11 of
last 12 trading sessions of April in the cash sector, data from market
regulator SEBI showed.
5.
Weak private sector data: The HSBC India
Composite Purchasing Managers’ Index (PMI) that indicates private sector
activity fell to a six-month low of 52.5 in April as demand remained elastic,
indicating that expectations from the change of guard at the Centre are waning.
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