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Market volatility erodes nearly Rs 7 lakh crore of investor wealth

Every sector was in the red, with finance, information technology, and the Bankex being the prominent losers

stock markets

Representational image. 

Every sector was in the red, with finance, information technology, and the Bankex being the prominent losers

It was a complete rout on Dalal Street on June 13, with the benchmark indices sliding 3 percent and eroding nearly Rs 7 lakh crore of investor wealth on a single day, getting the week off to a bad start.

US inflation in May at a 40-year high of 8.6 percent and US treasury yields at 3.19 percent worried investors the most globally as the Federal Reserve seems to be turning more aggressive in rate hikes this week.

After US inflation data, some global analysts changed their stance, expecting the Fed to hike the funds rate by up to 75 basis points instead of a 50 bps hike earlier. Fed chair Jerome Powell's commentary on June 15 night will be the most important factor to watch out for this week.

India's consumer price data for May is scheduled to be released later in the day, which is expected to be 7.1-7.3 percent against 7.79 percent in the previous month. These factors seem to indicate that the worst is still not over.

"Equity markets across the globe are witnessing a sell-off after US May inflation data accelerated to a four-decade high, which raised concerns about aggressive rate hikes by the US Fed in the upcoming monetary policy meet," said Hemang Jani, head of equity strategy at Motilal Oswal Financial Services.

Jani said on the domestic side, India's inflation data is due, on account of which nervousness is likely in the market. Apart from these, investors would continue to remain cautious ahead of various central bank meetings this week.

At 1.48 pm, the BSE Sensex was down 1,615 points, or 3 percent, at 52,688, and the Nifty was trading 472 points, or 2.9 percent, lower at 15,730.

Technically, the Nifty defended the 15,700 level, which acted as strong support in May. If the index closes below it, there could be a further correction in the market, experts said.

Investors lost more than Rs 6.82 lakh crore, with the BSE's market capitalisation dropping to Rs 245 lakh crore from Rs 251.8 lakh crore in the previous session. The erosion of wealth has exceeded Rs 13.6 lakh crore since May 30.

On the global front, Asian indexes, including Japan's Nikkei, Hong Kong's Hang Seng and South Korea's Kospi, were down more than 3 percent each, while China's Shanghai Composite fell 0.87 percent and Australia's ASX 200 declined 1.25 percent. Dow Jones, S&P500 and Nasdaq Composite futures were down 1.4-2.2 percent, indicating a negative opening in the US markets later in the day.

The broader markets also fell in line with the frontliners as the BSE midcap index declined 2.3 percent and the smallcap index was down 2.4 percent.

Every sector was under the control of bears, with finance, information technology, and the Bankex being the prominent losers, declining more than 3 percent each. Energy, industrials, capital goods, metal, oil & gas and realty indices were down more than 2 percent each.

The market breadth largely favoured the bears, as four shares declined for every share that gained on the BSE. There were 168 stocks that touched a 52-week low against 73 stocks that touched a 52-week high.

About 280 stocks hit the lower circuit compared with 202 that touched the upper circuit.

Disclaimer: Bizz Buzz advises users to check with certified experts before making any investment decisions.

Dwaipayan Bhattacharjee
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