After a weak start on Thursday, benchmark indices were dragged to their lowest levels in more than 5-months time due to heavy sell-off in the global markets as well as weak domestic cues.
Nifty plunged 1.62% or 177.35 points to close at 10,741.35, while Sensex plummeted by 587.44 or 1.59% to 36472.93
Realty, financials, metal and auto stocks led the decline in trade today.
Here are some of the key reasons which jolted the Indian stock markets today:
1. Muted global trade led by heavy sell-off: Taking cues from the global markets, Indian indices fell heavily in the late afternoon trade. Doubts in respect of both the interest rates in the US and the possibility of global stimulus package to strengthen the world economy reeling under slowdown weighed on market sentiment, which caused Asian markets to end lower.
In a similar fashion, European markets also started on a weak note in morning trade after the Fed Reserve's minutes provided that policymakers took the last month's rate cut move by the US central bank as just a recalibration and not as a start of the monetary easing cycle.
2. No fiscal stimulus announced by the government so far: Previously, the government emphasized that it will come up with likely capital market booster steps amid heavy FPI outflows. Also, investors awaited sector specific stimulus measures to curb the slowdown across industries. But as there is no clarity so far on the economic stimulus, investors' sentiment turned negative.
Rahul Bajaj from Bajaj Auto said that before asking for the stimulus to revive the ailing sector, the automobile industry on the whole should look at its shortcomings.
Also, possibility of a large economic stimulus package was ruled out today by Krishnamurthy Subramanian, India's CEA who said, "profit is private, losses are public" was not good economics.
3. Rupee inches down to its lowest levels of 2019: Rupee roiled in trade today to its lowest level of 2019 of 71.97 per dollar. The weakness in the domestic currency against the greenback came on the back of sustained foreign fund outflows and sudden weakness in yuan currency. At close, rupee ended at 71.81 per US dollar.
4. India Inc. reported weak earnings number for June quarter amid economic slowdown: As per a Care Ratings report, current economic slowdown also reflected in the earnings number of corporates which reported a sharp decline in growth of both profitability as well as revenue for the quarter ended June. Profitability of India Inc narrowed down to 6.6% in the June quarter as against 24.6% during the same period last year while revenue or net sales grew by just 4.6% in comparison to last year's 13.5%.
5. Easing of norms for FPIs also failed to cheer the markets: On Wednesday, SEBI relaxed the regulatory and compliance framework for foreign portfolio investors (FPI) by broad-basing their classification, simplifying their registration requirements and permitting them to execute off-market transfer of securities. While the measures on FPI regulations by the capital market regulator have been hailed to be good, nonetheless markets remain concerned about the tax proposals made for FPIs in the Union Budget and expect clarifications on the same soon.