Sensex sinks over 1,100 points: What's behind today's market crash
What's the story
India's benchmark equity indices, the Sensex and Nifty50, plunged sharply on Friday.
The BSE Sensex fell by 1,147 points or 1.41% to trade at 80,142 while the Nifty50 declined by 337 points or 1.37% to 24,211 in mid-morning trade.
The slump resulted in a loss of ₹6.5 lakh crore in the market capitalization of all listed companies on the BSE, which fell to ₹451.65 lakh crore.
Market decline
Metal stocks slump amid stronger dollar and China's uncertainty
The market fall was mainly led by a fall in metal stocks amid a stronger US dollar and uncertainty over China's economic stimulus measures.
The Nifty Metal index plunged up to 5%, with companies like SAIL, NMDC and Hindustan Copper declining between 3.5% and 5.5%.
The absence of specific details from China on its plans to revive the economy added to investor skepticism.
Market impact
Interest rate-sensitive sectors and market volatility rise
Interest rate-sensitive sectors like Nifty Bank, Auto, Financial Services, PSU Bank, and Realty also fell between 1.5% and 2.7%.
The India VIX index, which gages market volatility, jumped by almost 9% to 14.3.
A stronger dollar added to market woes as the dollar index rose by 0.13% to 107.1.
Market sentiment
Inflation figures and global markets influence sentiment
Inflation figures also played a role in shaping the market mood.
India's retail inflation eased marginally to 5.48% in November, but it remained elevated in rural areas at 9.10% and urban areas at 8.74%.
Food inflation eased but remained close to double digits at 9.04%.
Global markets reflected these worries as Asian shares fell on the back of a strong dollar and rising US Treasury yields.
Market outlook
FIIs continue selling off equities amid high valuations
In India, FIIs continued the sell-off, offloading equities worth ₹4,572 crore over two days amid high valuations and appreciating dollar post-US elections.
Despite these challenges, some analysts believe the market is in a consolidation phase with potential for future rallies if certain thresholds are crossed in the coming months.