Sensex Down 450 pts, Nifty Below 25,000-Mark: Key Reasons Behind Today’s Fall

The Indian equity markets are trading weak today. The downward pressure comes on the back of weak global cues, sell-offs in IT stocks and surging market volatility. Moreover, Moody’s downgrading measure has left the investors in a tizzy.

Sensex fell 459.53 points from its intraday high to 81,964.57, while Nifty plunged below the psychological 25,000-mark.

Infosys, Tata Consultancy Services, Grasim Industries, Eicher Motors and Tata Consumer Products were the major laggards on the index. On the other hand, PSU banks, pharma and realty stocks soared 2%.

Let’s look at the key reasons behind today’s fall

1. Moody’s downgrades US govt’s credit outlook

Credit rating agency Moody’s downgraded the US government’s credit outlook to “negative” from “stable”. It cited rising fiscal deficits and weak political environment in the country.

2. Surge in treasury yields

The yield on the benchmark 10-year US Treasury jumped by 4.52% from 4.44 percent on Friday, May 16. The 30-year yield crossed the 5 percent mark for the first time since April.

3. Weak global cues

Asian and European markets remained weak, buoyed by mixed cues from from China and the US. On the Asian markets front, Japan’s Nikkei 225, South Korea’s Kospi, China’s Shanghai Composite and Hong Kong’s Hang Seng traded with losses. In the US, Futures on the S&P 500 slipped by 1%, while Dow futures tumbled 0.7%.

4. IT Stocks

IT stocks declined over 1% following Moody’s downgrade. Notably, most IT companies earn a major proportion of their revenue from the US.

5. Increase in the volatility index

India VIX surged 11% to 19.81 today. A rise in VIX levels nervousness among investors.

“An apparently perplexing trend from the last trading day is that the market declined despite Rs 14,018 crore of institutional buying (FIIs plus DIIs). This indicates that FIIs are increasing their short positions in the derivatives market. So expect more volatility ahead,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.