Mirroring global peers, the domestic stock market shattered on Thursday with the benchmark indices Sensex and Nifty plunging 2 per cent each.
The S&P BSE Sensex tumbled over 1,000 points in the intraday trade while the broader NSE's Nifty50 index slipped below 10,300 level. At the close, Sensex stood at 34,001, down 760 points or 2.19 per cent. Nifty50 index settled 225 points or 2 per cent lower at 10,235.
"India had a pullback yesterday due to short covering post a fall of about 12 per cent from the 52-week high in a span of one month. We started with a strong selling due to a weak Asian market given sharp fall in the US market yesterday, fearing that rising interest rates and trade tension is going to impact company’s profitability," said Vinod Nair, Head of Research, Geojit Financial Services.
Here's a look at the key factors that spooked the investors on Thursday:
Sell-off in global stocks
Share markets in Asia plunged to a 19-month low on Thursday after Wall Street’s worst losses in eight months led to broader risk aversion, a rise in market volatility gauges and concerns over overvalued stock markets in an environment of rapidly rising dollar yields. MSCI’s broadest index of Asia-Pacific shares outside Japan was off 3.8 per cent around 0500 GMT, and earlier touched its lowest level since March 2017.
US stocks tumbled on Wednesday, with the S&P 500 marking its biggest daily decline since Feb. 8, and technology stocks led the losses as rising US Treasury yields sent investors fleeing from risky assets.
European shares, too, had their worst day on Wednesday since June. The pan-European STOXX 600 index tumbled 1.6 per cent to its lowest since April 4 while Germany's DAX dropped 2.2 per cent. It was the biggest fall for the STOXX since June 25.
Rupee inching towards 74.5/$
The rupee on Thursday hit fresh record low of Rs 74.48 per dollar of buying in the American currency by banks and exporters. However, the currency marginally recovered to 74.16 per dollar against previous close of 74.20.
The dollar remained steady against a basket of currencies after nervous investors drove US stocks to their worst fall in nearly eight months overnight.
FIIs on a selling spree
Foreign investors continued to dump Indian equities. According to latest data, the investors sold Rs 1,096.05 crore on Wednesday. FIIs have been net sellers to the more than Rs 16,536 crore in October 2018.
World Bank sees 'clear' economic slowdown
World Bank President Jim Yong Kim said on Thursday he is very concerned about the trade tensions between China and the United States and warned of a clear hit to global growth if all countries escalated their tariff threats. Kim also said more study is needed to understand the effects of the trade war on countries that supply goods and services to China.
IMF cuts global growth forecasts
The International Monetary Fund has cut its global growth forecasts as trade tensions between the US and trading partners have started to hit economic activity worldwide. The IMF said the global economy is now expected to grow at 3.7 per cent this year and next year — down 0.2 percentage points from an earlier forecast, according to the fund's latest World Economic Outlook report released on Tuesday. The fund also cut its forecasts for global trade volume: The total good and services flow is expected to grow by 4.2 per cent this year and 4 per cent next year — down 0.6 and 0.5 percentage points, respectively, from earlier estimates.