Sensex slumps 900 points, rupee at 1-month low vs US dollar. Key reasons for selloff – Mint

Here are key things to know about today’s market selloff

Asian markets were mostly lower today amid rising US bond yields while US lawmakers’ struggle to raise the debt ceiling also weighed on investor sentiment. 

Investors were also closely monitoring the developments at troubled Chinese developer Evergrande. Concerns that an energy crunch in China could hit growth in the world’s number two economy were adding to the downbeat mood, with Goldman Sachs lowering its outlook for this year.

Oil prices rose more than 1% to extend a recent rally on demand expectations and worries about supplies, with Brent breaking $80 for the first time in three years.

“Rise in US 10-year bond yield is a negative for emerging markets like India, particularly if this trend sustains and gathers momentum, going forward. Rise in Brent crude to $80 is a negative for India’s macros,” says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“There is profit booking in IT since the segment has given excellent returns of 82 percent one-year return. Markets might consolidate for a while before making a decisive move,” he added.

The US dollar rose to its highest in more than five weeks against a basket of other currencies. U.S. Treasury yields have surged since the end of last week, after the Federal Reserve said it will likely begin reducing its monthly bond purchases as soon as November and hinted that interest rate hikes may follow more.

Goldman Sachs today lowered its annual economic growth forecast for China as nationwide power cuts hit millions of homes and halted production at factories, including some supplying Apple and Tesla. Nearly 60% of China’s economy is powered by coal, but supply has been disrupted by the pandemic, tough emissions targets and drop in coal imports amid a trade tiff with Australia.

Some analysts attributed today’s selloff in Indian market as intermittent, healthy pause in a buyer’s market after their recent outperformance against other peers. Volatility could continue as the festive and the earnings seasons kick in, said Ajit Mishra, Vice President of Research at Religare Broking.

Trading was slightly volatile today, with the Nifty volatility index surging 2.7% in morning trade.

Among the Sensex stocks, HDFC, Infosys, ICICI Bank, HCL Tech, Bajaj Finserv, Bharti Airtel and Bajaj Finance were among the top laggards, down between 2% and 4%.  (With Agency Inputs)