5 Reasons Why Sensex Crashed 1,066 Points Today

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Indian share markets witnessed a sharp sell-off today and ended their session deep in the red.

Benchmark indices took a breather today after rallying for 10 consecutive sessions in a row, the biggest rally in 13 years, largely led by losses in IT and banking stocks.

At the closing bell, the BSE Sensex stood lower by 1,066 points (down 2.6%).

The NSE Nifty closed lower by 290 points (down 2.4%).

Bajaj Finance and Tech Mahindra were among the top losers today.

The SGX Nifty was trading at 11,695, down by 267 points, at the time of writing.

The BSE Mid Cap index ended down by 1.8%. The BSE Small Cap index ended down by 1.5%.

On the sectoral front, stocks from the banking sector, telecom sector, and IT sector bled the most.

Asian stock markets too ended on a negative note, with the Hang Seng and the Nikkei ending down by 2.06% and 0.5%, respectively. The Shanghai Composite ended lower by 0.26%.

The rupee is trading at 73.42 against the US$.

Here are Top 5 Factors Why Indian Stock Markets Crashed Today

US Stimulus Hopes Fade: US markets ended lower overnight as investors lost hope that a US fiscal stimulus would be approved before the presidential election in November. US Treasury Secretary Steve Mnuchin said he and House of Representatives Speaker Nancy Pelosi were far apart on another coronavirus economic relief package, and that a deal would be hard to reach before the November 3 elections.

Weak Global Cues: Indian share markets opened amid muted global cues with weaker Asian markets and stocks in Europe falling for the third consecutive session in early trading.

US-China Trade Tensions: Trade tensions between Beijing and Washington continue after the US State Department submitted a proposal for the Trump administration to add China's Ant Group to a trade blacklist before the financial technology arm of e-commerce giant Alibaba is slated to go public.

Banking and IT Stocks Bleed: IT and banking stocks witnessed most of the selling pressure today. Major brunt was seen as these sectors were outperformers of the rally seen in the last few trading sessions.

The IT sector ended 2.7% lower today, after the rally that was seen this month on the back of strong quarterly results and buybacks.

New Global Lockdown Measures: As per a Reuters report, governments across Europe tightened restrictions to control second wave of COVID-19 infections. France imposed curfews while other European nations are closing schools, canceling surgeries and enlisting student medics as overwhelmed authorities face the nightmare scenario of a coronavirus resurgence at the onset of winter. The news dampened the prospects for economic recovery and weighed on stock markets.

We will keep you updated on how these factors develop in the coming days and what effect they have on Indian stock markets. Stay tuned!

Speaking of the current stock market scenario, note that the markets climbed back to their highest levels since the pandemic began.

The Sensex breached the 40,000-mark earlier this month. Meanwhile, the Nifty went past the 12,000-mark earlier this week on Monday.

The smallcap index is up more than 60% since 23 March.

As per Richa Agarwal, lead smallcap analyst at Equitymaster, there could still be a lot of steam left to this smallcap rebound rally.

Have a look at the history of previous smallcap crashes and rebounds over the last two decades...

Every big fall in the smallcap index was followed by a sharp up move, a minimum gain 200%. Twice the rebounds were just shy of touching 300%.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

From the commodity space, gold prices are trading down by 0.3% at Rs 50,380 per 10 grams.

Note that gold prices have moved up by more than 25% over the last one year. The yellow metal is considered a hedge against inflation and a weakening dollar. With the flood of money by governments and central banks expected to stoke inflation, investors are buying gold.

Also, ahead of the festive season, the Indian government has come up with another tranche of sovereign gold bonds that opened for subscription on Monday. The RBI on behalf of the government will issue gold bonds at Rs 5,051 per gram of gold.

The scheme will be open for subscription till to October 16.

To know how gold prices will perform ahead, tune in to the video below, where India's #1 trader Vijay Bhambwani tells you why the bull market for gold and silver still has a long way to go...

Moving on to stock specific news...

Infosys was among the top buzzing stocks today.

Buying interest was seen as it was reported that Infosys will roll out salary increases and promotions across all levels effective January 1 as the company forecast higher growth in the year ahead on the back of large deal wins from customers.

Infosys CEO Salil Parekh said that the company will pay a special bonus in the quarter to December, while paying 100% variable pay in the previous quarter.

The company added that the demand for its services is increasing as clients spend more on technology.

The IT major hired 5,500 people including 3,000 freshers in the second quarter. It plans to hire 16,500 freshers this year and has a target to hire 15,000 people next year

On the results front, India's second largest software services provider reported a 14.4% sequential growth in consolidated profit at Rs 48.5 billion for the September quarter (Q2FY21), and revised its full year revenue as well as margin guidance given the highest ever deal wins in Q2.

On a year-on-year (YoY) basis, Infosys reported 20.5% increase in its net profit.

Revenue from operations increased to Rs 245.7 billion in Q2FY21, up by 3.8% QoQ, while dollar revenue grew by 6.1% sequentially to US$ 3,312 million.

Operating profit stood at Rs 62.3 billion, a growth of 16.1%.

The company revised its revenue growth guidance upward to 2-3% in constant currency for financial year 2020-21, from 0-2% earlier.

The full year operating margin guidance was also revised upward to 23-24%, against 21-23% earlier.

The company also declared an interim dividend of Rs 12 per equity share.

To know more, you can read Infosys' Q2FY21 result analysis on our website.

In news from the IPO space, Equitas Small Finance Bank, the subsidiary of Equitas Holdings, has fixed the price band at Rs 32 to 33 per shares for its forthcoming initial public offering (IPO).

The IPO will open for subscription on October 20 and close on October 22.

The IPO consists a fresh issue of Rs 2.8 billion and an offer for sale of 72 million equity shares by Equitas Holdings, valued at Rs 2.4 billion at upper price band, taking the total issue size at Rs 5.2 billion.

The offer includes reservation of Rs 510 million worth of shares for eligible shareholders of Equitas Holdings and Rs 10 million shares for eligible employees of Equitas Small Finance Bank.

How this IPO sails through remains to be seen. Meanwhile, we will keep you updated on all the developments from this space. Stay tuned.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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