Sensex tanks 1,045 points, Nifty down 371; investors lose Rs 10 lakh crore

The Sensex plunged 1,045 points and the Nifty fell 371 points on Thursday as Indian equity markets witnessed heavy selling pressure with investors reacting to the RBI’s shift towards a tighter monetary policy, a sharp rise in crude oil prices and continued foreign fund outflows. This was 50-stock index’s lowest close in 18 months. Over Rs 10 lakh crore in market-capitalisation was erased from the benchmarks as the sell-off extended through the session.

The Sensex, which fell around 150 points at the open, eventually declined 1,045 points by the close as sell-off intensified through the trading session.

The Nifty also extended its losses from around 70 points at the opening to finish 371 points lower.

The sharp decline came a day after the Reserve Bank of India raised the repo rate by 25 basis points to 5.50 per cent and shifted its policy stance from “neutral” to “calibrated tightening”.

The RBI decision was the biggest trigger for the market as the central bank raised the repo rate by 25 basis points to 5.50 per cent. While the rate hike was largely expected, the change in stance to “calibrated tightening” raised concerns that monetary tightening could continue if inflationary pressures persist.

Higher interest rates can weigh on equity valuations by increasing borrowing costs and making fixed-income investments relatively more attractive.

The RBI also flagged risks from elevated crude oil prices and tighter global financial conditions, adding to investor caution.

Crude oil surges above $104

Besides, a sharp rise in crude oil prices added to the pressure on Indian equities. Brent crude climbed nearly 4 per cent to around $104.09 a barrel as concerns over West Asia supply disruptions continued. Since India is heavily dependent on imports to meet its oil requirements, higher crude increases the import bill and puts pressure on the rupee.

FIIs continue to sell

Continued selling by foreign institutional investors emerged as another major drag on Indian equities. FIIs sold Rs 6,121.37 crore in the cash market on Wednesday, following sales of Rs 2,961.30 crore on Tuesday and Rs 4,699.14 crore on Monday.

They had sold Rs 9,484.22 crore on October 1, Rs 10,148.41 crore on September 30 and Rs 9,980.22 crore on September 29, as they pulled out around Rs 43,395 crore over six trading sessions.

Rupee remains under pressure

The Indian rupee also remained under pressure amid elevated crude prices, foreign fund outflows and high US bond yields. The rupee was trading around 96.76 against the US dollar, close to its recent record-low levels.

A weaker rupee makes imported commodities such as crude oil more expensive while companies importing raw materials can also see their costs rise.

Thursday’s decline was broad-based, as the Nifty Metal index fell 3.40 per cent, while Oil & Gas dipped 2.60 per cent, Realty fell 2.68 per cent, Auto 2.01 per cent and Pharma 2.26 per cent.

FMCG stocks also dipped around 2.02 per cent, while Healthcare declined 2.31.