Amid anxiety, concern and hopelessness, Sensex shreds 807 points on Thursday

The domestic equity benchmarks touched a new  52 week low on Thursday and plunged over 800 points because of heavy selling pressure as the pressure on banking stocks continued for the second day in trade. Bank Nifty was down more than 3 per cent and closed at 6976.35 for the day. The downward pressure was led by losses in realty, power, bank, capital goods, consumer durable and metal stocks.

Nifty50, Sensex and Nifty Bank all hit their fresh 52-week lows, with Nifty50 hitting the lowest level since May 30, 2014, down 20 per cent from its all-time high point of 9,119.20. A 20 per cent fall in the index from its recent peak signifies the onset of a bear phase.

The reasons for Thursday’s market crash: 

1) The fall in the index was led largely by banking sector. The BSE Bankex is down by 629 points (3.81 per cent) at 15889.92. Most of the PSU banks have reported over 40 per cent jump in provisions requirement. As much as 85 per cent of the banking system's weak assets are in the books of public sector banks (PSBs). Increasing stress is also visible in the quantum of strategic debt restructuring and 5/25 structuring being carried out by banks.

2) Federal Reserve Chair Janet Yellen testified before the House Financial Services Committee on Wednesday. She said that the Federal Reserve is unlikely to reverse its plan to raise interest rates this year. She further highlighted that volatile financial markets across the globe, tighter liquidity and uncertainty over Chinese economic growth have raised risks to the U.S. economy.

3)US crude tumbled below $27 a barrel in Asia today as the oversaturated market struggled to cope with high inventories in the United States and an increased output from The Organization of the Petroleum Exporting Countries ( OPEC), said a media report. Brent crude for April fell to $30.52 a barrel.  The decline came despite the weekly US Department of Energy report showing US oil stocks fell for the week ending February 5, with traders seeing inventories still at high levels. Crude oil prices have been in a downward spiral since July of 2014. The benchmark Brent crude prices in London have crashed from $106 in July, 2014 to $30 today, a drop of over 70 per cent.