4 Reasons Why Sensex Plunged 1,046 Points Today

Thu, 16 Jun Closing

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Indian share markets extended losses to the fifth trading session as dovish commentary by US Fed chair Jerome Powell failed to boost investor sentiment.

After opening the day on a firm note, benchmark indices fell from the day's high to end deep in red hitting fresh 52-week lows.

At the closing bell, the BSE Sensex dipped 1,046 points (down 2%).

Meanwhile, the NSE Nifty closed plummeted 332 points (down 2.1%).

Nestle was among the top gainers today.

Tata Steel, The Mahindra, and IndusInd Bank, on the other hand, were among the top losers today.

The SGX Nifty was trading at 15,321, down by 387 points, at the time of writing.

The broader markets ended deep in red. The BSE MidCap index and the BSE SmallCap index ended lower by 2.3% and 2.9% respectively.

All sectoral indices ended on a weak note with stocks in the metal sector, IT sector, and banking sector witnessing most of the selling.

Shares of Maharashtra Seamless hit their 52-week high today.

As Indian share markets have been in a downtrend, you must be wondering when will the markets fully recover.

In this uncertainty, check out these 5 fundamentally strong companies which pay regular dividends and are undervalued.

Meanwhile, check out the results of a poll we conducted recently asking readers what's their course of action in this market.

Not surprisingly, majority of people seem to be buying the stock market dip.

Asian stock markets ended mixed today as some investors cheered a sharp interest rate hike by the Federal Reserve.

The Nikkei advanced 0.4% while the Shanghai Composite declined 0.6%. The Hang Seng plunged 2.2%.

The rupee is trading at 78.07 against the US$.

Gold prices for the latest contract on MCX are trading flat at Rs 50,420 per 10 grams.

Speaking of gold, Chartist Brijesh Bhatia discusses whether gold is the best hedge against inflation, in his latest video for Fast Profits Daily.

Investors are once again showing interest in the yellow metal as a hedge against inflation.

But what do the charts say? How well does gold perform when inflation is high?

Brijesh answers these questions and more in the below video. Tune in to find out:

Here are four factors behind today's stock market meltdown which has eroded over Rs 7 tn of investor wealth:

Fed fear: Investor sentiment turned sour as they digested the implications of the US Fed's rate hike roadmap and dovish commentary to fight inflation.

Apart from hiking the interest rate by 75 basis points to a target range of 1.5-1.75%, the Fed also downgraded its US growth forecast for 2022 and 2023. On the other hand, it remained adamant that three would be no recession.

The Fed's dot plot was also moved higher with year-end rates expected to be 3.40% from 2.80% previously.

That implies another 1.75% of hiking in interest rate is still to come in 2022

FPI sell-off: As per data, foreign investors have sold equities to the tune of Rs 1.9 tn so far in 2022. This includes Rs 249.5 bn worth of FPI sold in June so far.

Note that FIIs have remained net sellers in the domestic market since October 2021, as per data on NSDL.

Global-sell off: The fall in the domestic market was in tune with what's happening in markets globally.

Most Asian markets also erased early gains as the focus shifted back to fears of recession.

After a relief rally overnight, Dow Futures were trading 1.9% lower.

While UK's blue-chip FTSE 100 fell 2.4% ahead of a Bank of England policy meeting expected to result in another interest rate hike.

Recession worries: Market experts are worried about whether the Fed's rate hike plan would be able to control inflation and whether it would lead to a recession.

Higher rates discourage capex and borrowing, in theory, this should slow down the economy and curtail inflation.

Earlier this week, a survey had shown that the US economy will tip into a recession next year as the Fed tries to control inflation which is at its highest level in the last 4 decades.

Speaking of the current stock market scenario, amid the ongoing volatility, have a look at the two charts below, in the order, they have been placed:

Near Term Volatility in Sensex Compensated by Long Term Gains

The year-on-year change in the Sensex was hardly predictable but someone who stayed invested multiplied every lakh nearly 14 times.

Timing the markets could be suicidal as valuations and volatility put the markets in a see-saw mode.

As an individual investor, you need to sit tight over high conviction stocks and invest consistently to see the magic of compounding.

Because 2022 could be extremely profitable, over time, provided you reset your portfolio with the right kind of safe assets and safe stocks.

In news from the aviation industry, SpiceJet has increased fares as much as 15% to counter high fuel costs and a weak rupee which have lifted operating costs to unsustainable levels.

In a statement, Ajay Singh, Managing Director of SpiceJet said:

• Both factors have left domestic airlines with little choice but to immediately raise fares.
  
  Aviation turbine fuel prices have increased by more than 120% since June 2021 and called on the federal and state governments to cut taxes.

The Indian currency's fall against the dollar is also significantly affecting airlines that have substantial costs that are denominated in or pegged to the US currency.

The rupee fell this week to a record low of 78.28 to the dollar, marking a decline of nearly 5% this year.

SpiceJet share prices tumbled 6.4% post the statement on the BSE today.

Moving on, Dredging Corporation of India was awarded a Rs 2.5 bn yearly maintenance contract for Mumbai and JNPA navigation channel.

The contract includes dredging of around 20 m cubic meters.

The company is aiming at its highest ever turnover of Rs 10 bn for the financial year 2023 after the extension of the contract by Jawaharlal Nehru Port Trust.

The Ministry of Ports Shipping & Waterways promulgated dredging guidelines 2021 and emphasized that major ports should award dredging contracts on a long-term basis.

Long-term contract of three years awarded by JNPA shall be an assured revenue to Dredging Corporation on India's topline amounting to Rs 2.5 bn per annum.

Dreading Corporation of India share price ended 0.3% lower on the BSE today, while it rose 0.5% on the NSE.

To know more, check out Dredging Corporation of India's financial factsheet.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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