The BSE Sensex declined 723 points on Wednesday, its biggest one-day fall since January 6, while the broader Nifty closed below 8,100 for the first time since December 17. The selloff marked the lowest close for the Sensex and Nifty so far this year.
Here are the big reasons for today’s selloff:
1) Tax worries: The biggest worry among market participants right now is the continued selling by foreign investors over concerns about the Minimum Alternate Tax on capital gains made during previous years. Foreign institutional investors have sold a total of Rs 11,720 crore or nearly $2 billion in the last 13 sessions, after adjusting for the Sun Pharma block deal in which FIIs bought heavily.
2) Weak corporate earnings: Most IT companies have reported weak earnings in the June quarter. Among other big companies, mobile operator Bharti Airtel, energy major Cairn India, and cement companies such as Ambuja and ACC have also reported weak numbers.
3) Rise in crude oil prices: Oil prices rose to 2015 highs on Wednesday, as a month-long rally gained further impetus from a fall in US crude stocks and conflict in the Middle East. Brent crude jumped by $1.36 to $68.88 a barrel, after hitting a 2015 peak of $69.14. Rising oil prices will increase the government’s worry as current account deficit will rise. India imports nearly 80 per cent of its oil needs.
4) Uncertainty over key bills: The Lok Sabha passed the constitution amendment bill on Goods and Services Tax that seeks to integrate the whole country into a single market today, but there’s uncertainty if the key reform will sail through the Rajya Sabha, where the government is in a minority. Similarly, the fate of the Land bill is not known because of fierce political opposition.
5) Flash trading: Traders attributed the initial fall to heavy selling in Singapore which was later followed by over Rs 900 crore ($141.7 million) worth of Nifty May futures being sold in three minutes from 9.39 a.m.
The Sensex closed 723 points lower at 26,717, while the Nifty declined 228 points to end at 8,097.