Why did the Nifty and Sensex crash so sharply on Friday 17th December?

It was a virtual carnage on Friday as the Nifty corrected by 263 points in a single day and the Sensex fell by 889 points on Friday. All sectors other than the IT sector, witnessed significant selling pressure on Friday. This selling was on the back of concerns that the unwinding of global stimulus packages could happen across the board and at a much faster pace. Of course, the latent threat of Omicron virus and high inflation made the day for bears.

During the day, the BSE Sensex touched a low of 56,951, before settling around 889 point slower at 57,012. For the week, Sensex lost a total of 1,775 points or 3% value. The Sensex touched a low of 16,966 on Friday and eventually ended 263 points lower at 16,985. The big fall in the index values came from heavyweights like Reliance Industries, HDFC Bank and HDFC which alone accounted for a 400 points fall in the Sensex.

Banks were the worst hit on concerns that higher rates would hit loan offtake as well as investment portfolio values. Among the losers, IndusInd Bank lost 4.7% while the other financials like Kotak Bank, Bajaj Finserv and HDFC lost over 3% each. Interestingly, there were a few Nifty gainers too. Infosys surged 3% on Friday while the other gainers in the index included HCL Technologies, PowerGrid and Sun Pharma.

The damage was seen across the large cap, mid cap and small cap indices. To illustrate, the BSE Midcap and Smallcap indices were down 2.4% and 2.1% respectively. The overall breadth was extremely negative, with the Nifty Fifty seeing A/D ratio of 5:45. Among sectoral losers, the Realty index fell 4% while other sectors like Energy, Banking, Auto and Oil & Gas indices fell more than 2.5% in Friday trade. It seems to be the bears in control.