The day’s four-figure slide in the sensex, from the day’s high to the low, was the second biggest in 2023, since the 1,957-point slide on February 1, the Budget day, official data showed.
Market players said a host of factors, which were known even before trading started on Wednesday, slowly combined to weigh on investor sentiment. As the sensex touched a new all-time high at 71,913 points in early trades, short selling picked up and pulled the index into the negative territory. Speculators faced margin calls but due to tight liquidity situations in the market, some failed to meet their margin obligations, leading to liquidation of their positions. This added to the slide in the market further, in turn leading to more margin calls, more forced liquidation and a fall in the index, market players said.
During the day’s session, the sensex and Nifty, the two large-cap indices, lost 1.3% and 1.4%, respectively. BSE’s mid-cap index was down 3.1% while the small-cap index closed 3.4% down.
“Markets were on a record-setting spree for a while and have been in an overbought zone, so hiccups were expected in the form of profit-taking. Redemption was seen across the sectors, and even mid- and small-cap stocks came under the grip of a strong bear hammering,” said Prashanth Tapse of Mehta Equities.
The day’s slide in the market also left investors poorer by about Rs 9 lakh crore, with BSE’s market capitalisation now at nearly Rs 357 lakh crore, BSE data showed.
The day’s slide also came on the back of a Rs 1,322-crore net selling figure by foreign funds. But the same was more than evened out by a Rs 4,754-crore net buying by domestic funds, BSE data showed.
Market players also ascribed to several other reasons for the sharp fall in the benchmark indices. Those reasons included a sudden and sharp jump in crude oil prices due to some attacks on commercial ships in the Red Sea area, the recent rise in the number of people with Covid infections, hike in margins for derivatives trades for some contracts etc. However, veterans pointed out that these reasons were already known even before the market started. And yet, the sensex and Nifty had scaled new record-peak levels in opening trades. For Thursday, Dalal Street investors are expected to trade cautiously, dealers said.