Indian stock markets take a beating: Sensex suffers biggest intra-day crash in seven years

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Even as essential commodity prices were rising in India, there was more bad news for the country. The Indian stock markets took its worst beating in 2015 with Sensex suffering its biggest ever intra-day crash in seven years. In its opening trading session it lost over 1,100 points and Nifty fell below the 8,000 mark. Adding to the woes was the rupee breaching the 66.50 mark per dollar for the first time since September 2013 and global crude oil prices falling below USD 40 per barrel. Investors feared a slowing Chinese economy would hamper demand amid a supply surplus globally. The Brent and US crude oil futures have hit a six-and-a-half-year low on August 24.

Asian bourses hit a three-year low with growing concerns about China. Chinese equities faced a rout with an exodus from riskier assets and a weak Chinese economic performance leading to a global slowdown, have roiled markets globally. All the major Asian markets were in red. Among other Asian markets, Shanghai Composite dived 8.35 per cent, Japan’s Nikkei dropped 3.10 per cent and Hong Kong’s Hang Seng 3.26 per cent. Fears of a Chinese slowdown drove Wall Street to its lowest in four years. Global sentiments remained weak.

Credit rating agency Moody’s lowered India’s growth forecast to seven percent recently adding to the concerns. Deficient rains in the current monsoon and a slow progress of economic reforms have further alarmed investors in India. Sluggish exports only made the sentiments even more negative with India’s exports falling for the eighth, straight month in a row.

RBI Governor Raghuram Rajan assures investors and says that RBI will intervene when needed to prevent currency volatility. He further added that the RBI would not hesitate to use the reserves if the situation demands it. Foreign investors have pulled out nearly Rs 2,000 crores from the Indian markets in the backdrop of concerns over the Chinese economy coupled with a sharp erosion in the rupee. The woes in Greece only added to the misery.

Challenges for the Government

The Modi government and Finance Minister Arun Jaitley should address the investor concerns and reassure the investors about its commitment to economic reforms. They should also address the issue of rising prices of essentials in the backdrop of a deficient monsoon. They should take measures to improve exporters’ sentiments. The government also has to worry about the free fall of the rupee and look to arrest the volatility in the currency.

Highlights

  • Sensex crashes over 1,100 points on global cues, biggest intra-day crash in 2015
  • Rupee in free fall, weakens further breaching the 66.50 per dollar mark
  • Economic slowdown in China
  • Asian bourses hit a three-year low; Wall Street at its lowest in four years
  • Heavy selling by foreign investors in Indian bourses, pull out nearly Rs 2,000 crores
  • Crude oil prices fall below USD 40 per barrel, at a six-and-a-half-year low

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