Swinging Sixties! 4 reasons why the Sensex tanked today and then recovered

The have cracked sharply in intraday trade on Tuesday, after the early morning volatility amid a broad-based sell-off. The BSE benchmark index, the Sensex, touched a high of 60,288 in the opening deals, but soon changed course thereafter. The selling pressure accentuated in the second half of the trading session, with the BSE index dropping to a low of 59,045 – down 1,243 points in intra-day trade. Buying at lower levels, however, helped the recoup some losses.

In the preceding two trading sessions, the NSE’s index came within striking distance of the 18,000-mark, but fell short. On Tuesday, the index from a high of 17,913, plunged to a low of 17,576 in intra-day deals before recovering.

Here are 4 key reasons for the market performance seen on Tuesday:

Profit-taking: The have been on a stellar run for quite some time now, scaling fresh records in a jiffy, the last 5,000 points for the Sensex came within 28 trading sessions, and with valuations getting stretched, profit-taking was always on the cards. Analyts say the sharp rally in a short span of time is one of the key concerns. Investors who made a good return on their investment looked to take some money off the table. However, buying at lower levels in bluchip counters helped the markets recover some losses.

Oil prices: Rising oil prices that hit $80 per barrel on Tuesday for the first time in three years are also a concern for the markets. India imports over 70 per cent of it crude oil requirement, and a rise in international oil prices fuels inflation concerns back home. The latest gains for Brent, according to reports, came amid a broad rally in energy markets, with growing competition between Europe and China helping drive gas prices to record levels in recent weeks. As a result, petrol price was hiked to Rs 101.39 a litre in Delhi from Rs 101.19 and to Rs 107.47 per litre in Mumbai, according to a price notification of state-owned fuel retailers. READ ABOUT IT HERE

Derivative Expiry: September has been an eventful month for the traders as they navigated through the US Fed meet and the developments in China. They now seem to lighten positions instead for rolling over due to concerns surrounding the global markets such as China’s Evergrande crisis, high oil prices and rise in bond yields.

September quarter earnings: Investors are also taking a cautious stance ahead of the start of September quarter earnings season next month.

“When the markets started to rally, 18-odd months ago, IT stocks were the leaders. In the last two trading sessions, we have seen IT stocks decline by 8-10 per cent on earnings concern, as Rupee has taken a hit against the US dollar. Apart from the weakness in Rupee, new hiring and hike in wages can also have an impact on the earnings for the IT firms,” said A K Prabhakar, head of research at IDBI Capital.

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