InvestorQ : What were the reasons for a recent market crash? Will the fall continue?
Archita Jajjoo made post

What were the reasons for a recent market crash? Will the fall continue?

Rashi Mehra answered.
3 years ago

There were quite a few reason for the markets to crack sharply on October 01st
. In fact, at one point the Sensex was down by nearly 740 points before recovering. There were quite a few triggers for this crash in the market.

· Moody’s raised some serious doubts over whether Indian PSU banks would be able to stand the stress tests under different conditions. This led to rapid selling across the PSU banks with banks like SBI losing ground heavily.

· The pressure on NBFCs and vulnerable banks continued for the day. IndusInd and Yes were under a lot of pressure with pledged shares being sold. With LVB moved to Prompt Corrective Action (PCA) by the RBI, its merger partner Indiabulls Housing took a deep dive. Indiabulls group also took a deep cut due to the legal hearing coming up in the money laundering issue. This put tremendous pressure on financials.

· The global scenario continued to be very ambivalent. The Trump impeachment process is under way and that is adding to market uncertainty. Also, the latest growth numbers from China were quite disappointing hinting that the trade war was really hitting China. Also BREXIT continues to be an overhang on the Indian markets.

· Auto numbers were again disappointing. Maruti and M&M showed 22% fall in sales for the month of September on a YOY basis whereas Tata Motors witnessed a 48% fall. Weak auto numbers was also a major overhang on the markets.

· The infrastructure growth number was more disappointing than anticipated. Core sector growth came in at a disappointing (-0.5%) and even the PMI Manufacturing was at a multi month low. This raises doubts over the GDP figure for the Sep quarter.

· Markets were also a little sceptical ahead of the RBI meet on 04th October as well as the next quarterly results which will commence from the middle of October. The current account deficit at 2% continues to be grim and that was also a factor in the markets.

In short it was a mix of domestic and global factors that took its toll on the stock markets on 01st October.