Sensex Sinks 550 Points; Volkswagen Crash Hits Global Sentiments

Indian stock markets headed sharply lower in late trade on Tuesday tracking developments in Europe, where key markets plunged after a muted start. The BSE Sensex slumped as much as 570 points or over 2 per cent, while the Nifty traded below the key 8,800 after dropping nearly 190 points.

Here are 10 developments:

1) The Sensex is heading for its steepest loss in September.

2) Traders linked the selloff in domestic stock markets to developments in Europe, where markets in Britain, France and Germany slumped between 2-3 per cent after a muted start. Dow futures were also down 1.2 per cent indicating a lower start for the Wall Street tonight.

3) European equities retreated after strong gains in the previous session, with metal companies facing a heavy sell-off after copper prices fell sharply on concerns about a global surplus of the industrial metal.

4) European shares have also been weighed down by the crash in Volkswagen, which fell more than 5 per cent today after slumping nearly 19 per cent in the previous session.(Read)

5) Global markets have been volatile since the Federal Reserve’s policy announcement last week. The Fed retained its fund rate near zero per cent citing global risks, but economists have linked the US central bank’s cautious stance to the slowdown in the global economy.

6) The Sensex was weighed down by banking stocks, which saw profit-taking after recent outperformance. The index for banking stocks, Bank Nifty, fell nearly 3 per cent.

7) Traders said risk aversion ahead of Reserve Bank’s policy review on September 29 could be the reason for the selloff in rate sensitive banking stocks.

8) Metal and capital goods stocks were also under pressure today with Vedanta and Hindalco slumping over 6 per cent while L&T fell over 3 per cent.

9) India VIX or the fear gauze, which measures volatility in markets, shot up 11 per cent. Rising volatility is being linked to the upcoming derivatives expiry on Thursday.

10) Analysts are also worried about sustained selling of domestic shares by foreign investors. FIIs had sold a record Rs 16,877 crore (net) worth of domestic stocks in August, leading to the recent selloff in Indian markets. In September, FIIs have sold shares worth Rs 2,100 crore so far.