A fall in small- and mid-cap stocks, set off by US President Donald Trump’s trade war mongering, in February that turned into a crash in June has put market traders firmly on the backfoot leading to a sharp decline in volumes.
On Wednesday, nearly 60 per cent of the BSE-200 stocks were traded below their 200-day moving average as Sensex and Nifty recorded a fall of nearly 1 per cent and the rupee hit a 19-month low against the US dollar.
The S&P BSE Sensex plunged 273 points, or 0.77 per cent, to close at 35,217. The broader CNX Nifty was down 97 points, or 0.91 per cent, and ended the day at 10,671.
A rise in global crude oil prices on Wednesday was another reason for the nervousness in the market, and oil marketing company shares cracked. The BSE oil and gas index was down 2.93 per cent, posting the steepest fall among sectoral indices. The share price of Hindustan Petroleum was down over 7 per cent, BPCL fell 6 per cent and Indian Oil closed nearly 5 per cent lower on Wednesday. The rupee plunged by 30 paise intra-day to hit a 19-month low of 68.54 against the US dollar, while oil prices rose sharply on disruptions in Libya and Canada after US officials said all countries should stop Iranian crude imports from November.
“Nearly 40 per cent of all listed stocks in India are now trading below their 52-week lows. For context, proportionately, this is higher number of stocks trading lower than the levels seen in the fourth quarter of 2016, immediately post-demonetisation,” said Path Shah, an equity dealer in Mumbai.
But Thursday may offer a ray of hope for traders as index futures recovered nearly 1 per cent of their fall before the markets commenced trading in the US. The Dow Jones, S&P and Nasdaq indices were all trading more than 0.5 per cent higher on comments by Donald Trump that the US may not yet look for harshest sanctions against China.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost another 0.3 per cent after touching a two-year trough on Tuesday. Chinese blue chips eased 0.4 per cent on Wednesday.