Sensex sees worst single-day percentage fall in 6.5 years

Indian shares, rupee tank in line with global sell-off; worst not over yet, say experts

Salil Panchal
Published: Aug 24, 2015 05:44:19 PM IST
Updated: Aug 24, 2015 06:01:51 PM IST

Life is not a template and neither is mine. Like several who have worked as journalists, I am a generalist in my over two decade experience across print, global news wires and dotcom firms. But there has been one underlying theme in each phase; life gave me the chance to observe and tell a story -- from early days tracking a securities scam to terror attacks and some of India's most significant court trials. Besides writing, I have jumped fences to become an entrepreneur, as an investment advisor -- and also taught the finer aspects of business journalism to young minds. At Forbes India, I also keep an eye on some of its proprietary specials like the Rich list, GenNext and Celebrity lists. An alumnus of Xavier Institute of Communications and H.R College of Commerce and Economics in Mumbai, I have worked for organisations such as Agence France-Presse, Business Standard, The Financial Express and The Times of India prior to this.

Sensex sees worst single-day percentage fall in 6.5 years
Image: ArkoDatta / Reuters: For representational purposes only
Reacting to other Asian markets, India’s stock markets opened gap down and showed little sign of a bounce back during the day, with metal, automobile, banking and IT stocks being the hardest hit

The BSE benchmark 30-share Sensex index plunged 1,624.51 points or 5.94 percent to 25,741.56 points – to its lowest point for the year – mirroring the sharp sell-off seen across global markets, as investors became more risk averse, fearing a China-led global economic slowdown.

The Indian rupee also fell to a fresh two-year low of 66.70 to the dollar on Monday. Earlier in the day, Reserve Bank of India (RBI) governor Raghuram Rajan sought to reassure investors about India’s relatively stable macroeconomic conditions, compared to other economies.  

Monday’s fall for the Sensex was its worst single-day percentage fall since January 7, 2009, analysts said. There could be further pain and volatility in the system, they add.

The meltdown at the stock markets was something economists and fund managers had feared for some time, considering that the Chinese government and the central bank had for weeks been trying their best to reassure investors and introduce policies to revive sentiment, even as economic indicators turned weak. On Monday, the benchmark Shanghai Composite index was down 8.46 percent at 3,209.91, its biggest single-day percentage loss since 2007.

Reacting to other Asian markets, India’s stock markets opened gap down and showed little sign of a bounce back during the day, with metal, automobile, banking and IT stocks being the hardest hit.

“This [fall] was long overdue. We had been saying for a long time that the Chinese economy was heading for trouble,” said Saurabh Mukherjea, CEO, Institutional Equities with Ambit Capital.

Mukherjea said the impact on other sectors of the economy, including commodities, metals, mining and banking, will be visible. “We expect the markets to remain volatile in the coming few trading sessions led by negative global cues and the upcoming futures and options expiry,” said Dinesh Thakkar, chairman and managing director of Angel Broking.

Deep Mukherjee, senior director with India Ratings and Research, a Fitch Group company, said the negative impact of the depreciating rupee will be limited to “highly leveraged” net importers, particularly in sectors like fertilisers, consumer durables, chemicals, metals and mining and airlines.

Anand James, co-head (technical research desk) with Geojit BNP Paribas, said: “The cascading effect of Chinese equity markets’ fall has now dragged equity markets down across globe, with investors gauging the impact on currencies, trade as well as risk appetite.” James said the rupee, despite the sharp depreciation, is “less exposed” to global risks, as forex reserves (at $354.4 billion), and low commodity prices give a reasonable import cover.

Click here to see Forbes India's comprehensive coverage on the Covid-19 situation and its impact on life, business and the economy​

Check out our end of season subscription discounts with a Moneycontrol pro subscription absolutely free. Use code EOSO2021. Click here for details.

Show More
Post Your Comment
Required
Required, will not be published
All comments are moderated