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Five charts that show why the Sensex crashed

Sensex and Nifty were weighed down by a global rout as well as the reimposition of LTCG tax in the Union budget last week

business Updated: Feb 06, 2018 15:25 IST
A man walks past a screen displaying news of markets update inside the Bombay Stock Exchange (BSE) building in Mumbai, India, February 6, 2018.
A man walks past a screen displaying news of markets update inside the Bombay Stock Exchange (BSE) building in Mumbai, India, February 6, 2018.(REUTERS)

The sharp rally in the Indian equity market has changed course for now and hit a pause, with the carnage in global markets weighing down heavily. On Tuesday, Sensex plunged more than 1,200 points in early trade, mirroring the meltdown in world equities. In the US, Dow Jones fell over 1,100 points on Monday, logging its biggest fall since six-and-half years after US wage data on Friday pointed to quickening inflation which may lead to higher rates by the US Federal Reserve.

Indian markets were already reeling under pressure after the government presented the budget that focused on populist measures ahead of general elections in 2019 and re-imposed long-term capital gains (LTCG) tax on equities.

Performance this year

With stunning gains in January, even after the carnage in the first session of February, benchmark Sensex and Nifty are down only 1% and 1.7%, respectively, so far this year.

Underperformance compared to other emerging markets

Indian markets have underperformed most key emerging markets year to date, as analysts keenly await corporate earnings recovery.

FII, DII inflows in equities since January

Data available until 2 February showed that foreign institutional investors (FIIs) were net buyers of Indian shares of more than $2 billion so far this year, while domestic institutional investors (DIIs) took a breather in January, and invested a mere Rs400 crore in the asset class in the period.

Top losers for Sensex

Tata Motors Ltd shed more than 10%, after it missed profit estimates by a wide margin in the December quarter. Financial stocks were the key losers for Sensex, with private lenders falling the most.

Sectoral losers

BSE telecom index is the worst performing sectoral index, as telecom operators became a victim of the tariff war triggered by Reliance Industries Ltd’s Jio, and the index is down 16% year to date. BSE Realty index followed with a 12.1% decline.