Why Did The Sensex Crash Today? Investors' Wealth Fall Above Rs. 5.10 Lakh Crore: See Reasons

The Indian stock markets have crashed sharply today, on May 6. The Sensex has plunged by 1,000 points, while the Nifty went below 16,400. The major reason behind the market crash can be identified as the key lending rate hike by the central banks of countries, including India's central bank. Today, the bears are leading the Dalal street, and investors' wealth has slipped above Rs. 5.10 lakh crore.

One of the most significant reasons behind today's Sensex crash is a 50bps interest rate hike by the US Federal Reserve, the country's central bank to control inflation. Government bonds are more lucrative now. England's inflation rate is anticipated to reach above 10%. The Bank Of England has stated that the UK economy can shrink in 2023, and it has raised the rate by 0.25%. In addition to that, the RBI has hiked the repo rate by 40 bps, which has suddenly impacted the equity markets to fall.

These reasons are leading to more FPI outflow from the Indian equity markets. Already the FPI outflow situation has been much worse in the last 8 months in India. During this period, the foreign investors were the net sellers of the Indian equities. Interest rate hikes by the central banks of the major economies are making them take shelter under the Govt. bonds. This week, they have sold Indian equities worth $635 million. So, the gold rates are also falling globally, investors are selling their holdings to invest in the bonds.

Additionally, the commodity markets, especially the oil markets are leading the global markets at present. With a surge in the crude oil prices, equities, globally are under pressure now.

Apart from these reasons, the LIC IPO, the biggest public offering in India is also a major reason. Investors were pulling their money out of the equities to invest in the LIC IPO. The Rs. 20,557 crore issue of LIC IPO has already been subscribed 103% by the end of Day 2. The LIC IPO bidding is one of the biggest drivers in the Indian markets now.

About today's market, Vivek Bajaj, Cofounder StockEdge told Goodreturns, "The Nifty 50, the benchmark index, consolidated between 16850 and 17100 points. Markets weakened below the same zone, which worked as long-term support levels. The Nifty 50 has also begun to trade below its 200-day moving average. Only 32% of companies in the Nifty 500 basket are currently trading above 200 days, according to market breadth data accessible on the StockEdge App. Moving averages indicate that broader markets are also weakening. Markets will be weak until the Nifty 50 begins to move above its 200-day moving average, and traders should treat the market as a 'Sell on Rise' opportunity. Long-term investors with an investment horizon of half a decade or more can look for sound companies and continue doing SIPs every month. This is the best time to accumulate quality companies at a good value."