The BSE Sensex on Tuesday closed at 25696.44 with around 586 points drop. This has factored in loss of 1600 points on 24th August 2015 which was the biggest-ever for Sensex, while in percentage terms, this crash was the biggest since January 2009. The Sensex was among the worst-performing index in Asia today.
Reasons for Stock Market Crash in recent times
1) Fears of China Slowdown: Fears of a massive slowdown in China have been brewing up for a while, but manufacturing activity data last week confirmed that the world’s second biggest economy is indeed struggling. Shanghai stock markets have plunged over 30 per cent this year, leading to a contagion effect in other global markets. Other major global economies such as Brazil, Russia and Japan are also struggling, but China’s export and import linkages with the rest of the world makes it a special case, experts say.
2) Fears of Currency War: There are fears that China could be forced to devalue the Yuan even more should its economy falter further. The Indian rupee has been better off, though it has shed over 4 per cent to a two-year low of 66.21 per dollar in last two weeks.
3) Risk-off Strategy played by foreign investors: Due to uncertainty and slowdown worldwide, the first instinct of global traders is to sell riskier assets and hoard cash. In times of such panic-selling, economic fundamentals don’t matter, and that explains the huge selling by foreign investors in India over the last few days. Foreign investors sold shares worth more than Rs 16,500 crore in the August month, leading to a slide in domestic markets. If the momentum of selling by foreign investors increases over the next few days, Indian markets could be headed for even bigger fall.
4) US Fed rate hike Fear: There is fear of FOMC’s decision to raise interest rates in September 2015 meet which remains data-dependent, hence upcoming Friday’s 4th September 2015 non-farm payrolls report will be a release worth watching.
5) Domestic concerns: Weak Q1FY16 earnings & No major reforms decision taken by Government also lead to one of the factors for fall in Indian Stock market.