Volatility has become the buzzword in Indian market these days, with key indices rising and falling at short intervals, a trend analysts attribute to nervousness and uncertainties prevailing in India and globally.
On Tuesday, the benchmark BSE Sensex opened 80 points higher and climbed 200 points, before plunging 700 points to the day’s low of 25,571.34. The index finally recovered marginally to close at a two-week low of 25,652, a decline of 541.14 points, or 2.07%.
The total market capitalisation of BSE-listed companies fell Rs 1.36 lakh crore to Rs 93.33 lakh crore.
The Nifty also mirrored the Sensex’s volatility and fell 165 points, or 2.07%, to 7,812.
“While fundamentally there are two factors - nervous jitters in the derivatives market and concerns on global deflation - I think investors are over-reacting to every development,” said G Chockalingam, founder director, Equinomics Research & Advisory.
Of the 30 Sensex stocks, 26 ended lower led by Vedanta (down 6.2%), Hindalco (down 6.2%), Coal India (down 5.4%) and Tata Motors (down 4.8%).
Weak global cues stemmed from the recent US Federal Reserve’s decision to hold on to interest rates. This has been viewed by different investors as an admission by the US of a deflation in the global economy, especially after a series of disappointing developments in China last month that culminated in a devaluation of its currency, yuan.
Sentiment also turned weak on fears of widespread regulatory action on auto companies following adverse emission records by German major Volkswagen.
In India, the nervousness was also due to investor fears before the expiry of the derivatives, which has seen cancellation of options, indicating loss of faith in any stock upsurge. “There is also uncertainty over whether the RBI would cut rates on September 29,” said Dipen Shah of Kotak Securities.