Sensex crashes over 900 points: Top 5 factors behind Monday’s market rout

Subdued global sentiment due to mayhem in the global financial sector unleashed bears on Dalal Street on Monday. Benchmark indices Nifty50 tumbled over 250 points or 1.6 per cent to hit an intra-day low of 16,828 levels, whereas the S&P BSE Sensex crashed over 900 points or 1.5 per cent to hit a low of 57,084 levels.

Broader markets, too, bled in tandem as Nifty Midcap 100, and Nifty Smallcap 100 indices declined over 1 per cent each.

All sectors, on the other hand, plunged in the sea of red, with the Nifty PSU Bank, and Metal indices declining up to 3 per cent.

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Analysts attribute this fallout in domestic equities due to investors’ fear of a domino effect after the collapse of big financial institutions in the US, and Europe.

“The fears of financial contagion rising from the banking crisis in the US, and Europe appear to be largely contained by the quick response of the governments and central banks. The big learning from the global financial crisis of 2008 is that failure of large financial institutions will lead to systemic issues leading to financial contagion and ultimately to recession. Learning from this crisis, this time there has been a concerted global action – the latest being the buyout of Credit Suisse by UBS – to contain the crisis,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Meanwhile, here are top factors behind Monday’s market fall:

Mayhem in the global financial sector: The collapse of US lenders Silicon Valley Bank, Signature Bank, and takeover of Credit Suisse by Swiss Bank UBS in Europe left investors worried about contagion effects in the global banking system. This propelled investors to exit risky assets like equities, and park in safe-haven areas.

That apart, investor woes lingered after Credit Suisse said that $17.24 billion of its additional tier-1 debt would be written down to zero, on orders of Swiss regulator’s rescue merger with UBS.

ALSO READ: Relief over Credit Suisse deal crumbles as focus shifts to bond risks

Subdued global sentiment: The banking crisis weakened investors sentiment across the globe. Asia-Pacific markets, for instance, edged lower with Nikkei 225, Hang Seng, the S&P 200, Kospi, and Shanghai Composite indices declining up to 3 per cent.

Equity-futures tied to Wall Street, too, turned negative this noon. Dow Jones Futures, the S&P 500 Futures, and NASDAQ Futures slipped over 1 per cent each. They were about 0.3 per cent higher this morning.

US Fed meeting: The US Federal Reserve will declare its interest rate decision, following its two-day Federal Open Market Committee (FOMC) meeting on Wednesday, March 22. While some experts peg a smaller, quarter-point increase, others expect a pause in the rate hike cycle due to the recent banking turmoil.

Currently, the Fed funds rate stands within the range of 4.5-4.75 per cent after the global central banker hiked rates by 75 basis points (bps) for four consecutive times, followed by 50 bps in December, and 25 bps in January.

ALSO READ: Was the Fed too late on SVB even though it saw problem after problem?

Adani Group stocks fallout: Shares of Adani Enterprises, Adani Ports and Special Economic Zone, Adani Power, Adani Transmission, Adani Total Gas, and Adani Wilmar fell up to 5.6 per cent in an overall weak market on Monday’s intra-day trade. The fallout comes on the back of suspended work on a Rs 34,900-crore petrochemical project at Mundra in Gujarat.

Index-heavyweights bleed: The sell-off was intensified by losses across index-heavyweights like Bajaj Twins, Tata Motors, Tata Steel, Reliance Industries, Ultratech Cement, Tata Consultancy Services, as shares tumbled up to 5 per cent in Monday’s intra-day trade. In comparison, the S&P BSE Sensex crashed over 900 points to hit day’s low of 57,084.