Sensex crashes over 950 points: Top 4 factors behind a wobbly Wednesday

Bearish global mood drove domestic equity markets lower in Wednesday's intra-day trade, as investors awaited February minutes' reading from the Reserve Bank of India (RBI), and the US Federal Reserve (US Fed).

While the benchmark index Nifty50 crashed over 250 points or 1.63 per cent to hit a low of 17,535 level, the S&P BSE Sensex tumbled over 950 points or 1.6 per cent to 59,703 levels.

The dampened sentiment spread to broader markets as well, with the Nifty MidCap 100 and Nifty SmallCap 100 indices declining over 1 per cent each. India's volatility gauge, India VIX, meanwhile, jumped 13 per cent.

All sectors plunged in the sea of red. Nifty Metal index was the worst sectoral performer, dropping up to 2.5 per cent.

That said, analysts believe that this down trend is a short-term gyration and investors should use this dip to accumulate high quality growth stocks.

"The US macro data continues to dictate equity markets globally. The US markets reacted sharply negatively to the series of economic data, which indicated that the process of disinflation is slow and, therefore, the US Fed will have to continue raising rates longer than expected earlier. This pushed up the 10-year bond yield sharply to 3.95 per cent. These negative US equity market trends are impacting equity markets everywhere and India cannot be an exception to this trend, at least in the near-term," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Here are the top four factors behind Wednesday's market fall:

Feeble global sentiments: The US equity markets posted their worst one-day performance so far this year, on Tuesday, as investors feared higher interest rates, on the back of strong macro-economic data. Recently, the S&P Global Purchasing Manufacturers index expanded to 50.2 in February, the first expansion in eight months.

Following this resilient report, key indices Dow Jones, the S&P 500, and NASDAQ Composite declined over 2 per cent each. The wreck across equities tied to Wall Street also came ahead of the US Federal Reserve's minutes reading from the February meeting, due later today.

That apart, Asia-Pacific markets, too, followed similar footsteps and edged lower in Wednesday's trade.

Hawkish minutes likely from central banks: Both the central banks - the RBI and the US Fed - will release minutes from their February policy committee meetings on Wednesday. Traders will use this reading to map policy outlook and interest rate trajectory.

While India's retail inflation accelerated to 6.5 per cent in January 2023, consumer price index (CPI) in the US rose 0.5 per cent in January to 6.4 per cent. With this spike in inflation data, it gives more ammunition to both central banks to stick to their policy tightening path.

Index heavy-weights decline: As the S&P BSE Sensex declined over 950 points to slip below 60,000-mark, the weakness in the benchmark index was driven by losses across index heavyweights. Shares of Bajaj Twins, Reliance Industries, State Bank of India, Tata Motors, Wipro, NTPC, Hindustan Unilever, Asian Paints, among others declined up to 3 per cent.

Rupee's free-fall: The domestic currency depreciated 4 paise to 82.83 against the US dollar in Wednesday's early trade. While the rupee opened flat at 82.79 against the US dollar, it lost some steam later to quote at 82.83. The dollar index, which gauges greenback's strength against a basket of six currencies, meanwhile, slipped 0.09 per cent to 104.01.