Bloodbath On Dalal Street

US developments hit Indian markets, with the return of capital gains tax adding to negative sentiments

- Arindam Mukherjee

In the past few days, Dalal Street has been nothing less than a war zone. Stocks have been beaten down, the market has fallen constantly and there is a lot of pressure on the indices. Though the Sensex recovered on Thursday and closed with a 330-point gain, the bloodbath may continue in the immediate future as stocks correct their exalted positions.

On February 6, a Tuesday, the bloodbath was particularly severe—the Sensex dropped to an intraday low of 33,483, and finished the day at 1.6 percent or 561 points low at 34,196.94. Much the same way, the NSE Nifty dropped from its earlier level to 10,276, but recovered to close at 10,498 points, a good 168 points or 1.6 percent lower than its previous close. This was the biggest intraday fall for both the indices since November 2016. As a result of the fall, almost Rs 9.5 lakh crore worth of investor money was wiped out in just three days.

Most experts feel the massive decline in the markets was triggered by the downturn in equities in the US, coupled with rising bond yields. The global market tanked heavily on this and the S&P 500 index fell by six percent. The repercussions showed in other world markets with FTSE, Hong Kong and Japan’s Nikkei falling steeply. “The main cause of the big crash is the fall in the global markets leading the FIIs (foreign institutional investors) to pull out quite a bit of money from the Indian market,” says Deepak Shenoy, stock market expert and founder of Capital Mind. “As long as the world markets are weak, there will be an impact on the Indian stock markets.” As if on cue, immediately after the market crash of Monday in the US, Indian markets tanked on Tuesday.

Another factor contributing to negative market sentiments is the rather muted performance by the Indian corporate sector in the last eight quarters, which many attribute to policy changes and developments such as higher oil prices and implementation of GST.