Bear attack: Equity investors become poorer by Rs 8.91 lakh crore in single day

New Delhi: Equity investors became poorer by Rs 8.91 lakh crore on Wednesday as markets came under a bear attack, with the benchmark Sensex falling almost 931 points after hitting its fresh all-time high level.

Erasing all its early gains, the 30-share BSE Sensex crashed 930.88 points or 1.30 percent to settle at 70,506.31 points. The index opened higher and later gained 475.88 points or 0.66 percent to hit its all-time high of 71,913.07 points.

However, broad-based selling pulled down the benchmark to the day’s low of 70,302.60 points.

“Amid worries over moderation in growth on account of elevated interest rates and higher energy prices, heightened risk aversion was witnessed in the Indian mid- & small-cap space, banks, metals, and energy stocks. While a period of consolidation in the short term seems certain, the extent of this phase will be shaped by global factors,” he said.

Investors lost a notional wealth of Rs 12.79 lakh crore from their kitty as the total market capitalization of all BSE listed companies crashed to Rs 311.33 lakh crore at close on Monday from Rs 324.12 crore on Friday, October 20. Here are the key factors that weighed on the market sentiments.

Rise in the US bond yields: The benchmark 10-year Treasury yield rose above 5 percent and to its highest since 2007 on Monday, as a roaring US economy led investors to expect interest rates to stay high for an extended period. The 10-year Treasury yield reached 5.012 percent,the latest sign of the scale of the global bond sell-off, driven by rising government debt increasing supply of bonds around the world.

Geopolitical concerns: The war in the Middle East region was also high on traders’ minds for the day. The risk of Israel’s war with the militant group Hamas becoming a wider regional conflict is keeping markets on edge, as Israeli air strikes battered Gaza early in the day. Furthermore, the United States dispatched more military assets to the region. Clashes on the Israel border with Lebanon intensified.

Benchmark indices witnessed severe pounding in the last hour trades as simmering geo-political tension in the Middle East triggered a wave of selling pressure and prompted investors to offload equity, said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities. “The Israel-Hamas conflict has increased further and led to weak sentiment in global equities.”

Economic Indicators: Investors are waiting for several events this week, including the European Central Bank meeting, and the release of US GDP data and the Federal Reserve’s preferred inflation gauge. Federal Reserve Chair Jerome Powell’s comments on the US economy’s strength and hot labour markets might warrant tighter financial conditions dented the sentiments.

Consistent FPI outflows: Foreign portfolio investors continue to pull out money from the Indian equity markets. After dumping equities worth Rs 14,768 crore in the month of September 2023, overseas investors have pulled out Rs 10,345 crore from the local shares, according to the data from NSDL.