The benchmark BSE Sensex settled nearly 500 points down in trade Monday amid weak global cues, weakening rupee and surging crude oil prices. Even the Nifty closed below 11,600-level in the intraday trade today. While Sensex crashed 495.10 points to close at 38,645.18, Nifty dived 158.35 points to 11,594.45. Both the indices recorded their biggest 1-day percentage fall in 2019.
Markets were looking overbought for some time, however due to the wave of FII money coming in the correction in the markets was not playing out. Markets just needed a trigger to fall and as such we have seen that the Crude Price spike has become the trigger. Correction should play out over the next few days and then setup the markets for a bigger up move, market veteran Sandip Sabharwal told Financial Express Online.
In addition, considering this to be week of expiry, weakness may also be attributed to the F&O action.
Key reasons behind the stock market plunge:
Rising crude oil
The prices of crude oil futures surged Monday as speculators created fresh positions amid reports that the US may tell five nations including Japan, South Korea and Turkey, that they will no longer be exempt from the sanctions laid by the US if they keep importing oil from Iran.
Rupee is seeing weakness as crude oil scaled a 5-month high Monday. The domestic currency is trading downwards on expectations of a rise in dollar-demand for importing costlier oil, traders say.
The correction that was seen today in the stock market is not surprisingm Milan Vaishnav, CMT, MSTA told Financial Express Online.
“Since previous week, we have been raising concerns on important technical developments like persistent negative/bearish divergence of NIFTY against its lead indicators. Also, NIFTY has been defying its usual inverse relation with VIX which is up almost over 12% since last 6-7 trading session. With these negative technical indications, the rising Brent crude price along with weakening Rupee adds further pain in the Markets which are otherwise also technically prone to some corrective view”, he added.
The corrective bias may persist and any up-moves will get capped at 11760 going forward, he also said.