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Market Meltdown | Sensex Crashes 1624-pts; Erodes Rs 7-lakh-cr Wealth

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The markets crashed on Monday (24 August) leaving investors in a tizzy following the biggest percentage fall since 2009. It has been a while since the crash on the bourses has been as severe as this – it has largely been in reaction to the global markets carnage, the second effect of which has been a weaker rupee.
 
The BSE Sensex plunged 1624.51, close to a 6 per cent fall on Monday and nearly Rs 7 lakh crore got wiped out from the investors' wealth as rout in Chinese stocks triggered a global sell-off. The rupee, on the other hand, slipped into a two-year low at 66.74 per dollar. It is the major selloff in capital markets that triggered by a global meltdown in risk assets. Nifty, on the other hand, closed at 7,809.00, down 490.95.

The intra-day fall was even larger at 1,741.35 points -- the third biggest ever and highest in over seven years since January 21, 2008, even as Finance Minister of India Arun Jaitley and RBI Governor Raghuram Rajan, among others, sought to allay the fears and said fundamentals of Indian markets remain strong.

“Though it was one of the biggest single day falls in absolute terms as benchmarks slipped almost six percent, the silver lining is that India is better off compared to emerging market countries and there are no apparent domestic factors involved,” said Jayant Manglik, President, Retail Distribution, Religare Securities Ltd.
 
The BSE's 30-share index plunged as stocks across all sectors including energy, banking, auto, IT, infrastructure and real estate saw massive selling as investors turned jittery amid a global carnage.
 
The total investor wealth, measured in terms of cumulative market value of all listed stocks, plunged by nearly Rs 7 lakh crore and crashed below Rs 100-lakh crore mark to end the day at Rs 95,33,105 crore.
 
The broader 50-share NSE Nifty too witnessed heavy selling pressure and plunged by 490.95 points to 7,809.00.
 
Asian markets were also in deep red with Shanghai shares closing more than 8 per cent down, while European shares were also down close to 3 per cent in their early trade.
 
The narrative started two weeks ago after China sharply devalued the yuan on concerns about the state of its economy; fears linger that the Middle Kingdom may be forced to devalue the yuan further.  
 
The devaluation on August 11 has wiped more than $5 trillion off the world’s bourses. The Dragon’s economy, a key driver of global growth, grew at its slowest since 1990 last year; it has dipped more and grew at 7 per cent in each of the first two quarters this calendar. Brent and US crude oil futures hit fresh six-year lows to drop below $45 a barrel and $40 a barrel each as investors worried over weaker demand amid a supply glut.
 
While punters see the Indian economy as a bright spot, one also cannot overlook the fact that when one market falls, especially that of the size of China, it’s natural for other markets to follow suit. After all, China is currently the second biggest market in terms of market capitalisation. The Indian economy will feel the heat if the Chinese market remains uncertain and this is especially true for sectors that have exposure to China.
 
One may argue that the low commodity prices are good for India but an overall global slowdown is definitely not. So, all in all, worries are not over yet and going forward, the equity markets are expected to remain volatile.
 
In 2014, the previous calendar year, India’s net trade deficit with China stood at $45 billion with India’s export figures standing at $13 billion. In 2013, India’s net trade deficit was $35 billion, which was approximately a quarter of India’s deficit with all other trading countries. 


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