Sensex down 1,600 points in 3 days; Rs 4 lakh crore loss. 7 factors behind the selloff
Sensex lost 242 points on Monday, 796 points on Wednesday and over 600 points on Thursday, taking the total loss to 1532 points this week. The market was shut on Tuesday to mark Ganesh Chaturthi festival.
In the meantime, the market capitalisation of all companies listed on BSE has also fallen to Rs 319.5 lakh crore, taking the total investor wealth erosion to Rs 3.9 lakh crore.
Last night, the US Federal Reserve didn't opt for an interest rate hike but projected one more 25-basis-point rate hike this year and 50 bps of rate cuts in 2024, versus 100 bps of 2024 cuts in June projections.
The markets are likely to remain under pressure till they adjust and digest the fact that interest rates are actually not going down in a hurry.
«We believe that high-interest rates are not good for the markets.
Both the yields and markets cannot stay at an elevated level for too long. Either one will break down.
Given that Fed is resolute in its stand it could be the markets which break down first,» said Apurva Sheth of SAMCO Securities.
Here are top 7 factors keeping bulls under check:
1) Fed fear
Fed's signal to markets that higher interest rates are the new normal may have bearish implications. «US Fed's decision to defer rate hike, although expected, may keep global markets on tenterhooks.
Inflation in the US is still high and other economic parameters are still showing little signs of slowing down. US 10-year at 4.472% and 2-year at 5.184% does reflect the expectation that before year-end further rate hikes may be expected,» said Naresh Tejwani of Abans Group.
2) Bond yields
The yield on two-year US Treasury notes rose to a 17-year high of 5.1970%, while the 10-year yield jumped to 4.4310%, a new 16-year peak.
