5 factors that led to the market crash

on Aug 24
BT Online Bureau

New Delhi Last Updated: August 25, 2015 | 08:03 IST

Representational Photo

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Market rout: NSE VIX signals heightened volatility, rises 64.36%

The Indian market fell the most in seven years on Monday. In 2008,
the Sensex crashed more than 1,200 points on three separate trading days,
posting the maximum decline of 2,272 points (intra-day) on January 22,
2008. Today's Sensex fall of 1,624 is the fourth largest in market's history and
was triggered by various global cues.
We take a look at key factors that dragged the Sensex and Nifty 6 per cent
lower.
1.
China woes: Asian stocks slumped to three-year lows on Monday as a
slump in Chinese equities gathered pace with Shanghai slumping more
than 8 per cent as concerns deepened about China's stalling economy
which has rattled equity investors around the world. China-linked shares
tumbled in early trading as well with Hong Kong dipping 3.91%, Tokyo
diving 3.09% , Seoul losing 1.88% and Sydney falling by 2.89%. In addition,

weak Chinese manufacturing data came in on Friday.Over the weekend,

China also allowed its $547-billion pension fund, the world's largest, to be
invested in its volatile stock market. Recently, People's Bank of China
devalued its tightly controlled currency, causing market's biggest one-day
loss in two decades. But as the world's second-largest economy continues to
sputter, there are fears that China could be forced to devalue the yuan even
more.
2.

Crude oil price: Brent and US crude oil futures hit their fresh 6-1/2-

year lows as investors continue to worry about weak demand as China's

economy slows, amid a global supply surplus. Brent oil lost 44 cents at
$45.02 a barrel as of 0125 GMT after hitting its intraday low of $45.00
earlier the day. That's the lowest since $42.59 marked in March of 2009. On
Friday, it ended $1.16, or 2.5 per cent, lower at $45.46 a barrel
3.

Rupee fall: The rupee fell to a two-year low and plunged by 66 paise to
trade below Rs 66 level against the dollar for the first time in almost two
years in opening trade on sustained capital outflows even as the US
currency weakened overseas. At the Interbank Foreign Exchange Market,
the rupee fell by 66 paise to 66.49 a dollar in early trade.

4.

Sharp sell offs by foreign investors: Overseas investors have pulled

out nearly Rs 2,000 crore from the Indian stock marketssince the
beginning of August, amid concerns over Chinese economy coupled with
sharp erosion in the value of rupee. The net outflow by FPIs in equities
stood at Rs 1,943 crore during August 3- 21, while they invested a net sum
of Rs 79 crore in the debt market during the period, which works out to a
net outflow of Rs 1,864 crore, according to a PTI report.

5.

Wall Street's sharp plunge: On Friday, US markets recorded their

steepest one-day drop since 2011. Weak Chinese manufacturing data, and
another drop in China's stock market, rattled investors and led to Friday's
tumble. The Dow Jones industrial average closed down 530.94 points, or
3.12 per cent, to 16,459.75, the S&P 500 lost 64.84 points, or 3.19 per cent,

to 1,970.89 and the Nasdaq Composite dropped 171.45 points, or 3.52 per
cent, to 4,706.04.