Sensex tanks 1,600 points: Here are the key factors behind the market crash

Benchmark equity indices BSE Sensex and NSE Nifty cracked more than 3% on Friday following subdued global cues. The 30-share index Sensex traded nearly 1,600 points down at 49,441 at around 12.14 pm (IST), while the 50-share Nifty index traded 470 points lower at 14,627.

Here are the top factors behind the market crash today.

Weak global cues: Asian equity benchmarks traded in red in early deals, in line with the sharp decline in US stocks overnight amid inflation worries with the surging government bond yields, which could hurt high-growth companies reliant on easy borrowing. Oil shares are declining with the overnight dip of crude oil. Japan’s Nikkei retreated sharply driven by a massive selloff in major technology shares, and as exports curtailed with the firmer yen. Among the other Asian markets, Singapore, Hong Kong, Taiwan, Indonesia, South Korea, China and Malaysia are in bearish trend.

Soaring bond yields: Sharp increase in US 10-year bond yields weighted investors sentiment globally. In India, 10-year bond yields have also spiked to 6.23% from 5.95% during the past one month. Rising yields on government securities or bonds in the United States and India have triggered concern over the negative impact on other asset classes including stock markets.

Angel Broking said, “In general, the fears of the bond markets world over are reflected in the high yields. In such a scenario, bond markets are worried about inflation, because of stimulus packages that governments and central banks world over have announced. A sustained surge in yields will impact the stock markets. Rising bond yields tend to negatively affect equity valuations.”

Tension between US and Iran:

According to reports, the delay in the US President Joe Biden’s promise to revive the Iran nuclear deal has once again raised tensions in the region with Tehran announcing to disallow International Atomic Energy Agency inspectors to visit the nuclear sites from February 21.

Ajit Mishra, VP-Research, Religare Broking said that the rising bond yields in the US have spooked investors sentiments which has led to a sell off in global markets. Moreover, the geo-political tensions between US and Iran have also weighed on sentiments. Nifty may see a short term trend reversal below 14,600. We thus advise keeping existing long positions hedged.”

Macroeconomic data: Market sentiment also turned cautious ahead of the GDP numbers for the October-December quarter of the current fiscal. The government will announce the number later in the day.