Sensex plunges 1,800 pts in opening trade; five factors that triggered sell-off in market

The Indian benchmark indices opened sharply lower on Thursday, tracking weak cues from Asian peers and overnight sell-off in U.S. equities, as escalated geopolitical tensions triggered elevated volatility in the market. The Sensex and the Nifty declined more than 3% in opening deals amid broad-based selling, while realty and technology space declined the most. All the top 30 shares on the BSE Sensex pack were flashing red, led by Tech Mahindra, Bharti Airtel, IndusInd Bank, Wipro and State Bank of India, which dropped up to 4%.

At 9:40 AM, the Sensex was trading at 55,829, down by 1,403 points, or 2.45%, and the NSE Nifty fell 407 points, or 2.38%, to 16,656. The Sensex dropped as much as 1,856 points, or 3.2%, in opening deals, while the Nifty 50 tumbled 516 points, 3.02%, to 16,546.75.

The broader market also witnessed sharp sell-off with BSE midcap and smallcap indices falling 2.3% and 2.6%, respectively.

Sectorally, all indices were in red, while realty and technology space were among worst performers. The BSE realty index dropped 3.1%, led by Indiabulls Real Estate, Macrotech Developers, Sobha, Godrej Industries and Phoenix Mills, which slipped up to 5.5%.

Here are five factors that fuelled sell-off in the market

Russia-Ukraine tensions

The escalating tensions between Russia and Ukraine triggered a sell-off in global equities. The market rout extended around the world after Ukraine declared a state of emergency and the U.S. State Department said a Russian invasion of Ukraine remains potentially imminent.

Russia has announced military action in Eastern Ukraine days after it recognised the independence of two separatist regions in eastern Ukraine following a speech by President Putin.

"The growing concern surrounding the deteriorating Ukraine crisis has pushed global stock markets into correction mode. The near 20% decline from the peak in NASDAQ is a clear indication of the correction that has set in. Also, the safe haven gold shooting to $1,913 is a reflection of the risks arising from the crisis. Investors should wait and watch the unfolding situation before taking any major commitments. Buying should be confined to stocks/ segments which are fairly valued or have good earnings visibility,” says V K Vijayakumar, chief investment strategist at Geojit Financial Services.

F&O expiry

The domestic benchmark indices also witnessed volatility as traders rolled over positions in the F&O segment due to expiry of February contracts today.

The geopolitical tensions have also added volatility in the market and hence INDIA VIX, which indicates the volatility of the market, has reached 29.8 today. A higher India VIX indicates that traders are prepared to see even higher volatility.

Weak global cues

The market sentiment was also dented by weak global cues. In the overnight trade, all three major indices closed lower on Wall Street as Ukraine declared a state of emergency amid fear of invasion by Russia. The concerns about possible aggressive policy stance by the Federal Reserve to tame inflation also kept investors on edge. The tech-heavy Nasdaq Composite dropped 2.57%, the Dow Jones Industrial Average fell 1.4%, and the S&P 500 shed 1.8%.

In the Asia-Pacific region, all major markets were in red, led by Australia’s ASX 200 index, which tumbled 2.5%. Japan’s Nikkei 225 dropped 1.1% in early deals, South Korea’s KOSPI fell 1.8%, and the Straits Times Index in Singapore plummeted 1.6%. The Hang Seng index in Hong Kong nosedived 1.5%. In mainland China, the Shenzhen component and the Shanghai composite shed 0.4% and 0.2%, respectively.

Record rise in crude prices

The sustained rally in international crude prices also injected negativity in the market as it is likely to add inflationary pressure on the economy. The brent crude price crossed the $100 mark on Thursday as looming fear of an invasion of Ukraine by Russia, one of the major oil producers, dented market sentiments.

The oil price breached $100 per barrel briefly today for the first time since 2014 as traders feared further sanctions could impact Russia’s crude oil export.

During the early Asian trading hours on Thursday, the U.S. West Texas Intermediate (WTI) crude futures surged 3.3% to $95.14 a barrel, while the Brent oil futures spiked 2.94% to $99.69 per barrel.

Sustained selling by foreign investors

The foreign institutional investors (FIIs) stood as net seller in equity and debt markets on February 23. The FIIs net purchased stood at ₹9,102.54 crore and gross debt buying was at ₹352.03 crore, while the gross equity sold stood at ₹11.560.74 crore and gross debt sold stood at ₹783.34 crore. Therefore, the net fund outflows in equity and debt were ₹2,458.20 crore and ₹431.31 crore, respectively.