Sensex, Nifty fall a percent each: 5 factors that triggered the sell-off - Moneycontrol.com

The Indian market suffered strong losses with the benchmark Sensex falling 626 points and Nifty falling below 15,700 in intraday trade on July 8.

At close, the Sensex was 486 points, or 0.92 percent, down at 52,568.94 while the Nifty50 was 152 points, or 0.96 percent, down at 15,727.90.

Mid and small-caps, though in red, outperformed the benchmarks as the BSE Midcap and Smallcap indices fell 0.37 percent and 0.09 percent down, respectively.

"Indian market fell as investors were concerned on a private report stating that India's retail inflation likely to accelerate to a seven-month high in June on rising food and fuel prices, staying above the Reserve Bank of India's comfort zone for a second straight month," said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers.

"Some anxiety also came as Fitch Ratings cut India's growth forecast to 10 percent for the current financial year (FY22), from 12.8 percent estimated earlier, due to slowing recovery post-second wave of COVID-19. The market failed to recover in the closing session as EU and US futures were seen trading lower which further deteriorated the already weakened sentiments for the day," said Solanki.

Here are 5 key reasons behind the market fall:

1. Weak global cues: The Indian market witnessed a sell-off in line with the most global peers. Hong Kong stocks slumped to a six-month low on July 8 as tech firms tumbled amid persistent regulatory worries, reported Reuters.

"China’s market regulator said on Wednesday it had fined a number of internet companies including Didi Chuxing, Tencent and Alibaba for failing to report earlier merger and acquisition deals for approval, according to a statement on the website of the State Administration of Market Regulation (SAMR)," reported Reuters.

European markets, too, were down ahead of the outcome of the European Central Bank's strategy review on inflation and climate change among other points. Among the European indices, FTSE, CAC and DAX fell over a percent each.

2. Caution before ECB meet: The European Central Bank (ECB) will announce the outcome on July 8 of an 18-month strategy review.

The ECB's announcements may have significant points on inflation target and its role in the fight against climate change.

As per Reuters, its results may herald the biggest transformation of the hugely powerful but still relatively young institution that shapes monetary policy for the 19 countries that use the euro.

3. COVID cases rise in some countries: COVID-19 cases have been rising in some countries, raising concerns that the fresh wave of the pandemic may derail the economic recovery.

Australia's New South Wales (NSW) state on July 8 reported its biggest daily rise in locally acquired cases of COVID-19 this year, reported Reuters.

The highly contagious Delta variant has become the dominant coronavirus strain in the US, accounting for more than 51 per cent of Covid infections in the country, according to new data released by the Centres for Disease Control and Prevention.

4. Fed readies to taper bond-buying programme: The US Fed has hinted that it will begin to taper its asset purchases programme as soon as this year. This seems to have roiled the sentiment in emerging markets as the dollar traded near its highest in three months versus major peers.

5. Sombre economic outlook: Sentiments took a hit when Fitch Ratings decreased India's GDP outlook for the current financial year (FY22) to 10 percent from 12.8 percent earlier, citing a sluggish recovery following the second wave of COVID-19 as a reason.

Fitch believes that rapid vaccination could support a sustainable revival in business and consumer confidence; however, without it, economic recovery would remain vulnerable to further waves and lockdowns.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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Sensex, Nifty fall a percent each: 5 factors that triggered the sell-off - Moneycontrol.com
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