The 30-share BSE index tanked 1,020.80 points or 1.73% to settle at 58,099. During the day, it tumbled 1,137 points or 1.92% to 57,981.95.
The NSE Nifty plummeted 302 points or 1.72% to end at 17,327.
PowerGrid, M&M, SBI, Bajaj Finserv, Bajaj Finance and NTPC were the top losers in the sensex pack falling as much as 7.93%.
Sun Pharma, Tata Steel and ITC were the only winners on the BSE, rising up to 1.53%.
Here are the top reasons for today’s market fall:
* Power, financial stocks lead the fall
Financial stocks slid after the central bank barred Mahindra Group’s financial services arm from using third-party agents to recover loans.
Shares of Mahindra and Mahindra Financial Services fell 13.1% after the Reserve Bank of India directed the company to stop using third-party services for loan recovery until further orders.
“This move (by RBI) will be seen as negative for the stock as well as the companies lending for vehicles. It will reduce the collection efficiencies for these companies,” A K Prabhakar, head of research at IDBI Capital told Reuters.
The Nifty bank index had gained about 19% so far this quarter and had hit a life high last week on expectations of higher credit growth.
“Banks are seeing some correction after outperforming other sectors,” Jain said, adding that there was no serious threat to growth in banks despite a difficult macro environment.
Shares of Power Grid Corporation of India fell 8%, and was the top loser in Nifty 50 index
* US Fed’s aggressive stance
Investors also feared that an aggressive stance by US Federal Reserve would trigger foreign fund outflows.
Members of the Fed have projected aggressive hikes and persistently high rates over the next year or so, unleashing another round of dollar buying that put other assets on the run.
“Because of Fed’s move, lot of money that were coming to emerging markets will head back,” Saurabh Jain, assistant vice-president, research, at SMC Global Securities told Reuters.
Foreign investors net sold $152 million worth of Indian equities this week as of Thursday, after buying net $819 million worth last week, Refinitiv Eikon data showed.
* Global markets tumble
Global stocks fell for a third day Friday after more rate hikes by the Federal Reserve and other central banks to control persistent inflation spurred fears of a possible global recession.
London and Frankfurt opened lower. Shanghai, Hong Kong and Seoul declined. Oil prices fell by more than $1 per barrel. Japanese markets were closed for a holiday.
Investors worry central banks might be willing to tolerate a painful economic slump to get prices under control.
* RBI policy in focus
Investors are also eyeing the rate hike decession by the Reserve Bank of India’s monetary policy committee that is scheduled to meet next week. Amid soaring inflation, stakes are high that the RBI may opt for 50 basis point rate hike.
With retail inflation scaling to 7% in August and constant weakening in the rupee, rate hike seems inevitable. However, the extent of rate hike that RBI opts for will be seen on September 30.
* Rupee at lifetime low
The rupee slumped 19 paise to close at a fresh lifetime low of 80.98 against the US dollar on Friday, weighed down by the strong American currency overseas and risk-off sentiment among investors.
At the interbank foreign exchange market, the local currency breached the 81-mark for the first time ever and slumped to 81.23 against the American currency. It finally ended at 80.98, down 19 paise over its previous close.
“Rupee fell to fresh all-time lows against the US dollar after the Fed raised rates earlier this week. Most of the currencies are under pressure as the dollar continues to strengthen,” Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services told PTI.
(With inputs from agencies)
Watch Sensex extends losses to 3rd day, ends 1,021 pts lower on Fed hangover