Sensex plunges 572 points, Nifty holds 10,600: 5 factors behind market's pain

Adding to overnight losses, stock benchmarks fell by over 1.5 per cent on Thursday, apparently not impressed by the RBI policy action.

The NSE Nifty dropped 181.75 points or 1.69 per cent to 10,601.15, while Sensex settled at 35,312.13, down 572.28 points or 1.59 per cent.

Below are the key factors that hit market sentiment real hard.

Weak Asian markets echo
Selling picked up after sharp losses in Asian markets amid rising uncertainty about the global economy. Hang Seng, Nikkei and Shanghai were all down by up to 2.75 per cent on Thursday. Pain in technology shares pulled down stock indices in China and Hong Kong after the global chief financial officer of Chinese technology giant Huawei was arrested in relation to alleged violations of US sanctions.

Financial, metal, oil big drag
Banking stocks came under pressure after the Reserve Bank of India (RBI) said it would link retail loans to external benchmarks replacing MCLR. On the other hand, metal and oil shares went lower ahead of the Organisation of the Petroleum Exporting Countries (OPEC) meeting to discuss production cuts. ICICI Bank, YES Bank, Kotak Mahindra Bank, State Bank of India, IndusInd Bank, Axis Bank and HDFC Bank were down by up to 2 per cent at around 10.30 am.

Rupee cracks again
The rupee looked like reliving its painful memories all over again as it plunged 54 paise and hit the 71 per dollar mark in early session amid a strengthening dollar. Sentiment also turned cautious after rating agency Fitch cut India’s FY21 GDP growth forecast to 7.1 per cent from 7.3 per cent. It also sees the rupee weakening to 75 by the end of 2019. The global rating firm cut India growth estimates on reduced credit availability and higher financing costs.

FIIs rush out
Sustained selling by foreign portfolio investors (FPIs) as well as domestic institutional investors (DIIs) affected market sentiment. On a net basis, FPIs offloaded shares worth Rs 357.82 crore on Wednesday and DIIs were net sellers to the tune of Rs 791.59 crore, provisional data of the BSE showed.

Technically speaking
For Thursday's session, the level of 200-DMA, which was at 10,749 on Wednesday, is key to watch out for. Milan Vaishnav, Techncial Analyst, Gemstone Equity Research and Advisory on Thursday, said, “For any upsides to occur, defending this level of 10,749 will be important. Any breach of this level might induce some weakness.”