Benchmark indices witnessed a sharp cut in trade today, with the Sensex losing nearly 770 points, while the Nifty plunged 225 points.
It was the worst fall for the markets since Oct 2018. In short, it was the biggest ever drop for the benchmark indices in the last 11-months, leave alone 2019. Here are a few reasons the markets crashed in trade, along with a rally in bond prices.
Rupee Hits 2019 Low
The Indian rupee today fell to its lowest level in 2019, as sentiments took a turn for the worse. The rupee fell to 72.30 against the US dollar, as poor GDP numbers, left investors worried that Foreign Portfolio Investors may head for the exit.
Bonds on the other hand rallied, on worries that the low GDP numbers, which came in at 5 per cent may push the RBI to cut interest rates steeply.
Poor GDP numbers
GDP numbers that came in at just 5 per cent, were way below analyst estimates. In fact, most economists had expected the number to be closer to the 5.7 per cent mark. The low numbers stunned most investors as clearly it pointed to a sharper slowdown in the economy. The government measures of the last few weeks failed to cheer sentiments, as investors were worried over the deep slowdown.
Weak global cues
The Dow Futures were pointing to a cut of at least 0.75 per cent, which may have also led to some selling pressure. Asian markets ended weak, while European markets were all trading lower.
Weak auto numbers
Most of the auto numbers that were reported in the last couple of days, pointed to weak sales even in the month of August. From Maruti to Tata Motors the numbers were extremely weak pointing to very poor consumer sentiments.
GST colllections remains weak
July GST collections imply a current run-rate of around Rs 900 bn pushing up the required run-rate to Rs 1.18 tn for the rest of FY2020, a Kotak Report has stated.
Overall tax revenues will likely disappoint again, particularly with nominal GDP growth slowing down, but the RBI's additional surplus transfer along with likely expenditure savings will help in maintaining the budgeted GFD/GDP, the report has noted.