US financial crisis: ₹16 lakh crore worth m-cap of Indian companies wiped out in 5 days

PALAK SHAH | | Updated on: Jun 16, 2022
The Sensex and the Nifty declined by 2 per cent, which was still lower than the market’s fall in the other developed countries

The Sensex and the Nifty declined by 2 per cent, which was still lower than the market’s fall in the other developed countries | Photo Credit: FRANCIS MASCARENHAS

Markets in Europe too were trading lower by nearly 3 per cent

India’s stock markets fell to their 52-week low level on Thursday as volatility in the global markets spiked ahead of the biggest ever options expiry in the US on Friday. Panic and fear gripped the global equity markets since derivative options worth nearly $3.4 trillion will expire in the US following the US Federal Reserve’s decision to hike key interest rates by 75 basis points, which is the highest rate hike since 1994.

The Sensex and the Nifty declined by 2 per cent, which was still lower than the market’s fall in other developed countries. The Sensex closed at 51,495 after a decline of 1045 points and the Nifty index closed at 15,360 after a fall of 331 points.

No signs of recovery

In Indian listed companies, nearly 16 lakh crore worth of market capitalisation has been wiped off in the past five trading sessions. The market capitalisation of Indian listed companies fell below ₹240 lakh crore for the first time since August 23, 2021. When the US markets opened for trading on Thursday after India closed, the key indices Dow Jones, S&P, and Nasdaq fell by 3 per cent with no signs of recovery.

Markets in Europe too were trading lower by nearly 3 per cent. The US has embarked on the most aggressive rate hike in three decades to tame inflation that has touched a 41-year high. Most experts are now anticipating another 75 basis-point rate hike in July by the Fed. There is a consensus among experts that the crisis cannot be solved unless global crude oil prices cool down. US sanctions on countries like Russia and Iran are the key catalyst for the spike in crude oil prices.

Nervous situation

“It is a capitulation in the global stock markets. But I don’t know if the current situation is better or worse than the 2008 financial crisis. Nearly $2 trillion has been lost in the crypto crash, with $1 trillion wiped out in the Apple market cap alone since January. So people are losing money at a very fast pace, and the situation is very nervous. The major problem is not in India but in the US since the markets are highly leveraged there. Whatever happens is happening in a fast-forward manner and the only hope is that it ends soon, “said Deven Choksey, MD, KR Choksey Investment Managers.

“A long bear candle was formed on the daily chart after opening higher (a long bear candle within a high low range of around 520 points). This candle has broken decisively below the important support band of 15700–15600 levels and closed lower. This downside breakout of the support could hint more downside for the market ahead, and any upside bounce from here could be a sell on rise opportunity. One may expect Nifty to slide down to the next lows of around 15000-14800 in the near term. Any upside bounce from here could be a sell on rise opportunity, “ said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Selling by foreign portfolio investors (FPIs) in India’s stock markets has crossed $25 billion in less than a year so far and there is no sign of respite.

Published on June 16, 2022
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