Indian markets reacted sharply to weak global cues with the Sensex spiralling down 332 points (1.82 percent) on Monday to end the day at 17,993.33. The sub-18,000 closing level was last seen two months ago. The Nifty was down 100 points and closed at 5386.55.
The trigger for today's sharp sell off was lingering concerns over the deepening Euro Zone sovereign debt problems, said Mr Amar Ambani, Head of Research (India Private Clients), IIFL.
“What we saw today were the macro head-winds which were caused by hardening commodity and oil prices over the months. This has led to slower growth globally and is bound to have an effect on us all,” said Mr Gaurav Dua, Head of Research, Sharekhan.
Another worrying trend for Indian investors is the unwinding of the dollar carry trade.
“The dollar carry trade, which last year due to the depreciating dollar caused markets to go up, has now started unwinding leading to a drop in the markets,” said Mr Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities.
Currency carry trade is a practice by which traders sell a currency with lower interest rate and buy another currency with a higher rate of interest, thereby taking advantage of the difference between the exchange rates. With the dollar appreciating once again, the competitive edge other currencies had over it has slowly started slipping leading to a reversal in investments, say experts.
Lower-than-expected results from GAIL and BHEL also pulled down the market, though expert opinion on this is split. BHEL, which holds about 2 per cent weightage in the Sensex, was down by 6.7 per cent on Monday to Rs 1,935.60 a piece.
In the last six months, the Sensex has given negative returns of 11.6 per cent while in this calendar year the returns have been a negative 12.4 per cent.
According to data on the bourses, FIIs were net sellers at Rs 293 crore on Monday, while DIIs bought shares worth Rs 194 crore in the net. Retail investors, on the BSE were net buyers at Rs. 10.7 crore. “Though I could not buy anything today because of some prior appointments, I would surely like to pick up some blue-chip Nifty-50 stocks at least tomorrow,” said Mr A. Mohapatra, a retail investor.