Sensex Crash News: ET Market Watch: 6 key factors driving Sensex down nearly 800 points today
1) Pressure of FPI
The government has ended tax relief for foreign portfolio investors (FPIs) in Mauritius. The amendments introduce the Principle Purpose Test (PPT) to deter treaty abuse by taxpayers. Mauritius is the fourth largest source of FDI in India and holds about 6% of India’s total FPI assets.
2. US inflation
Higher-than-expected inflation data from the U.S. has dashed hopes that the Federal Reserve will cut interest rates as early as June. The Fed minutes also show that officials are beginning to worry that current policy rates are not restrictive enough.
3. Bond yield
Higher-than-expected U.S. inflation has caused U.S. bond yields to surge. The U.S. 2-year interest rate exceeded 5% for the first time since November. The 10-year yield hit its highest level in five months. While higher yields are negative for FPI inflows, analysts suggest dips could be bought as domestic liquidity remains high.
4. Valuation
With markets hitting record highs, many investors are cautious about valuations and holding off on making new investments.
5. Profit Reservation
Many investors have been booking profits and adjusting their portfolios during bull market segments.
6. Rising raw material prices
Gold, silver, zinc, copper, cocoa and coffee prices are on the rise. According to experts, rising commodity prices mean higher inflation. When inflation is high, interest rates rise. According to Samco’s Apurva Sheth – This leads to higher borrowing costs and lower returns. And it can lead to a decline in stock prices.
