Three reasons for the Sensex falling over 900 points on Thursday – World Affairs SRS

Three reasons for the Sensex falling over 900 points on Thursday

– World Affairs SRS

The stock market remained under heavy selling pressure on Thursday on weak global cues. In intra-day trade, BSE Sensex lost 927 points while Nifty 50 slipped below 17,700 mark.

Markets started the calendar year 2022 on an upbeat note, with major benchmark indices posting strong gains in each trading session so far. The BSE Sensex on Wednesday reclaimed its 60,000 mark for the first time since November 17, 2021, while the NSE Nifty rose nearly 8 per cent (1,311 points) to 17,925 in the last 12 straight trading sessions.

Looking at the sharp rally in addition to profit taking, the selloff can be attributed to the following three major reasons:

1. US Fed FOMC Minutes

The December policy minutes of the US Federal Reserve dampened the spirits of officials. The minutes not only indicated that inflation could be quicker and faster than expected rate hikes, but could also ease into the balance sheet post rate hikes.
Also Read: LIVE Stock Market Commentary

“Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may be necessary to raise the federal funds rate sooner or faster than participants had previously anticipated, According to the minutes published on Wednesday.

“Some participants also noted that it may be appropriate to begin increasing the size of the Federal Reserve’s balance sheet relatively soon after the federal funds rate hike begins,” the minutes added.

After which the US markets traded sharply on Wednesday. The Dow, S&P 500 and Nasdaq fell 1 per cent, 2 per cent and 3 per cent, respectively. Asian counterparts were also seen following suit on Thursday, with Japan’s Nikkei falling 2.6 percent. Kospi and Taiwan also fell by about 1 per cent each, while Hang Seng and Shanghai suffered minor losses.

2. Rapid Rise in Covid-19 Cases, Omicron Threat

India reported 90,928 new Covid-19 cases in the last 24 hours, thus registering a sharp increase of over 56 per cent in daily infections. According to government figures, Omicron’s number was about 2,630.

The infectious spread has led to new travel restrictions and restrictions at the state and international levels. While select cities such as Mumbai, New Delhi have announced curfew plans, others have also adopted 50 per cent occupancy rates in hotels and other amusement parks to limit overcrowding. On Wednesday, Hong Kong banned incoming flights from India.

3. Technical Battle

Technically Nifty has been on a downtrend since late November after falling below the 50-DMA of the 20-DMA (Daily Moving Average) on November 25, 2021. However, the recent rally has helped the NSE benchmark to close above its 50- mark. DMA for three straight trading sessions, thus increasing expectations of a possible trend reversal.

For the trend to reverse, Nifty not only needs to sustain above the 17,500-odd levels, but the 20-DMA (now around 17,260) also needs to cross the 50-DMA placed at the 17,485-odd levels. The tug of war between bulls and bears can get intense as they fight to get the upper hand.

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