A sharp rise in US 10-year bond yields, rising coronavirus cases and fear of foreign institutional investors pulling out of Indian markets triggered off a huge selloff leading to Indian and global stock markets plummeting on Friday.
The bloodbath on Dalal Street saw the BSE Sensex at 49,000 levels, having lost over 1,900-2,000 points, while the NSE Nifty had shed almost 500-600 points to be at 14,500 levels.
Most blue chip stocks were in the red as panicky investors sold off their holdings. But this can be a good opportunity for investors to buy quality stocks.
Experts say that there were 8 main reasons behind the stock market crash today:
Weakness in global markets
Soaring US 10-year bond yields
Rising COVID-19 cases
Crashing banking stocks
Fear of FIIs pulling out
Speculation that GDP figures to be announced today by India might not point to an economic recovery
Equity market or stock returns are inversely proportional to bond yields, meaning when bond yields rise, stock markets tend to slip and with the US bond yields rising sharply, investors in India triggered off a selloff on February 26, dragging the overall markets down.
The government will announce December-quarter gross domestic product data later in the day, and Reuters forecast sees the GDP growing 0.5% with the economy stabilising after contracting 7.5% in the July-September quarter.
The rupee too fell sharply on Friday against the US dollar as the greenback strengthened against a basket of other currencies.
Earlier, key equity indices slumped in mid-morning trade, led by weakness in banks shares. The Nifty slipped below the 14,700 mark. Auto shares snapped two-day rising streak.
At 11:22 IST, the barometer index, the S&P BSE Sensex, was down 1417.32 points or 2.78% to 49,621.99. The Nifty 50 index tumbled 404.95 points or 2.68% to 14,692.40.
In the broader market, the S&P BSE Mid-Cap index shed 1.62% while the S&P BSE Small-Cap index slipped 1.06%.
The market breadth was weak. On the BSE, 873 shares rose and 1756 shares fell. A total of 143 shares were unchanged.
The government will release the GDP numbers for the October-December quarter of the current fiscal on Friday.
Foreign portfolio investors bought shares worth Rs 188.08 crore, while domestic institutional investors , were net sellers to the tune of Rs 746.57 crore in the Indian equity market on 25 February, provisional data showed.
Total COVID-19 confirmed cases worldwide stood at 11,29,81,257 with 25,07,271 deaths. India reported 1,55,986 active cases of COVID-19 infection and 1,56,825 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India.
The Nifty Auto index fell 1.95% to 10,293. The index had gained 1.92% in the past three sessions.
Tata Motors (down 3.57%), Mahindra & Mahindra (down 3.41%), Ashok Leyland (down 3.28%), Hero MotoCorp (down 2.57%), Bharat Forge (down 2.23%), Bajaj Auto (down 1.73%), Eicher Motors (down 1.40%), TVS Motor Company (down 0.82%) declined.
Stocks in Spotlight:
Rain Industries rallied 3.33% to Rs 172.05 after the company's consolidated net profit surged 164.7% to Rs 321.99 crore on 6.7% decrease in net sales at Rs 2,640.23 crore in Q4 December 2020 over Q4 December 2019. Consolidated adjusted EBITDA margin improved to 18.2% in Q4 FY21 as against 16% in Q4 FY20.
Aptech lost 1.63% to Rs 222.95. The company currently operates in two business segments – Retail and Institutional. As part of a larger re-organization of the business of the Company, the two segments of the company were evaluated during the meeting of the Strategy Committee constituted by the company. The company has decided to focus on the Retail business. Hence it is recommended that, the Institutional (B2B) business be evaluated for a potential exit as may be appropriate. It intends to complete the exercise within a period of 12 - 16 weeks.
Asian stocks were trading sharply lower on Friday following an overnight drop on Wall Street as a rapid rise in bond yields rattled investor sentiment.
Japan's industrial output rose for the first time in three months in January. Official data released on Friday showed factory output advanced 4.2% in January, boosted by sharp rises in production of electronic parts and general-purpose machinery, as well as a smaller increase in car output.
U.S. stocks dropped sharply Thursday as an outsized surge in bond yields spooked investors, who rushed to dump risk assets, especially high-flying technology names.
The major averages tumbled as the 10-year Treasury yield soared as high as 1.6% in a sudden move that some described as a "flash" spike. The yield later settled back down to around 1.52%, its highest level since February 2020.
The US economy grew at a 4.1% pace in the final three months of 2020, slightly faster than first estimated, ending a year in which the overall economy, ravaged by a global pandemic, shrank more than in any year in the past seven decades. The 4.1% gain in the gross domestic product — the broadest measure of economic health — is a slight upward revision from 4% growth in the first estimate released a month ago, the Commerce Department reported Thursday.
At 12 noon, the BSE S&P Sensex was down by 1,455 points or 2.85 per cent at 49,584 while the Nifty 50 tumbled by 403 points or 2.67 per cent to 14,694.
Except for Nifty pharma, all sectoral indices at the National Stock Exchange were in the red with Nifty private bank down by 4.6 per cent, PSU bank by 4 per cent and financial service by 4.5 per cent.
Among stocks, ICICI Bank slipped by 4.9 per cent to Rs 597.10 per share. HDFC Bank ticked lower by 4.7 per cent, Axis Bank and IndusInd Bank by 4.4 per cent each and Kotak Mahindra Bank by 4 per cent.
The other major losers were Bajaj Finance, Bajaj Finserv, HDFC, JSW Steel and Mahindra & Mahindra. However, Maruti Suzuki gained by 0.3 per cent. Pharma majors Dr Reddy's and Sun Pharma were up by 0.7 per cent and 0.8 per cent respectively.
Meanwhile, Asian stocks skidded to one-month lows as a rout in global bond markets sent yields flying and spooked investors amid fears the heavy losses suffered could trigger distressed selling in other assets.
MSCI's broadest index of Asia Pacific shares outside Japan slid by 2.4 per cent to a one-month low while Japan's Nikkei shed 3.85 per cent.
Hong Kong's Hang Seng dipped by 3.12 per cent and South Korea's Kospi cracked by 2.88 per cent. The Shanghai composite index was down y 2.11 per cent.
Inputs: Capital Market, Dalal Street, PTI, ANI