The two key equity benchmarks fell by over 1 per cent on Wednesday eroding over Rs 3.46 lakh crore from investors' wealth. The stock market crashed under acute global pressure after rating agency Fitch downgraded the credit rating of the US to AA+ from AAA. The S&P BSE Sensex crashed over 1,000 points intra-day before settling at 65,783, down 677 points. On the other hand, the Nifty50 went down to 19,423, and eventually closed at 19,527, down 207 points.
Reflecting the overall bearish sentiment in the market, BSE-listed firms' market capitalisation suffered a significant erosion of Rs 3,46,947.54 crore, bringing it down to Rs 3,03,33,258.69 crore.
Fitch Ratings on Tuesday downgraded the US government's credit rating, citing rising debt at the federal, state, and local levels and a steady deterioration in standards of governance over the past two decades. The rating was cut one notch to AA+ from AAA, the highest possible rating.
"After the euphoric June and July, we are witnessing some healthy corrections today in Indian markets, due to the downgrade of the US rating by Fitch. Frankly, the market was waiting for some reason to correct in the last few days as it was in an extremely overbought zone, and it found its reason. The impact on the Indian market should also be short-lived, soon focus will come back on earnings, infra investments, and fund flows," said Vikram Kasat, Head Advisory at Prabhudas Lilladher, as per a PTI report.
While global sentiment weighed in, the market crash also reflected the fund outflow from India.
"The Indian market witnessed a broad sectoral slide, affected by weak global market trends. Negative news regarding the US rating downgrade on fiscal concerns, coupled with weak factory activity data from Eurozone and China, led to widespread worries across the globe. Additionally, prolonged FII selling, triggered by a rise in US bond yields, has disrupted the mood of the domestic market," said Vinod Nair, Head of Research at Geojit Financial Services, as per the report.
On the 30-share Sensex platform, Nestle, HUL, Asian Paints, TechM were the only four which ended in the green. On the downside, Tata Steel, Tata Motors, Bajaj Finserv, NTPC, JSW Steel, and SBI were among the top losers. A total of 2,353 stocks declined while 1,240 advanced and 139 remained unchanged.
In the broader markets, the BSE Midcap and Smallcap indices dropped about 1.4 per cent each.
Sectorwise, the Nifty PSU Bank index was the worst hit among broad-based selling as it fell 2.6 per cent, followed by the Nifty Metal index (down 2 per cent).
In the previous session on Tuesday, the S&P BSE Sensex closed at 66,459, down 68 points, while the NSE Nifty50 settled at 19,734, down 20 points.
In Asian markets, Seoul, Tokyo, Shanghai, and Hong Kong ended lower. European markets were trading in the red. The US markets ended mostly in the negative territory on Tuesday.
Foreign Institutional Investors (FIIs) offloaded equities worth Rs 1,877.84 crore on Wednesday, according to exchange data.