Sensex, Nifty see sudden sell-off: Factors that led to market crash today

The Indian market crashed in the afternoon session today. Sensex tumbled 1130 pts to 73,481 and Nifty plunged 296 pts to 22,351. All 19 BSE sectoral indices were trading in the red. Market cap of BSE-listed firms fell to Rs 404.48 lakh crore. Bharti Airtel, Reliance, L&T, Maruti Suzuki, Nestle India and Tata Motors were the top Sensex losers falling up to 3.37% in the afternoon session. Bajaj Twins were the only Sensex gainers, rising up to 1.8 per cent. India VIX, fear index, surged 11.6% to 15.01-level.

Market breadth was negative with 1267 stocks rising against 2516 stocks falling on BSE. 117 shares were unchanged.

Here’s a look at four factors behind the market crash today.

1. Profit-booking at record high

Nifty hit a fresh record high of 22794 in early deals on Friday. Sensex too approached its all time high of 75,124 reached on April 9 thi9s year. The 30 stock index rose to an intraday high of 75,095 in the morning session. With Nifty hitting record high, traders and investors chose to take money off their tables, which led to across-the-board sell off in the stock market.

2. Indian market outperformed global peers

The Indian market has outperformed its global peers in the last one year.  While global market cap increased 11% ($11.4 t), whereas India’s market cap surged 44% during the same period, said a report by Motilal Oswal.

3. High valuations

The Indian indices are trading at high valuations. The Nifty's P/E is now near its historical average, while P/B has crossed the historical averages. The Nifty is trading at a 12-month forward P/E ratio of 19.7x, near its LPA of 20.3x (3% discount). Conversely, the P/B ratio of 3.2x represents a 15% premium to its historical average of 2.8x, said the report by Motilal Oswal.

4. Capital goods, banking, auto shares top losers

BSE capital goods, banking and auto indices slipped 771 pts, 380 pts and 441 pts, respectively. The widespread selling across other sectors also contributed to losses in the market.

Previous session

Domestic benchmarks ended higher on Thursday. Nifty closed 43 points or 0.19% higher at 22,648 level. Sensex rose 128 points to end at 74,611. India VIX, fear index, surged 4.43% to 13.44-level.