SENSEX ends 645 points lower, NIFTY50 settles at 24,610; here are key factors behind fall

The Indian equity benchmarks fell sharply lower in trade on Thursday, May 22, on the back of weak global cues after spike in US bond yields led to flight of money from riskier assets like equities to safety of bonds, analysts said.

The SENSEX fell as much as 1,107 points while the NIFTY50 index touched an intraday low of 24,462, dragged down by losses in index heavyweights such as HDFC Bank, Reliance Industries, Infosys, ICICI Bank, ITC, Tata Consultancy Services and Mahindra & Mahindra.

The SENSEX ended 645 points lower at 80,952 and NIFTY50 index declined 204 points to close at 24,619.

Here are key factors behind market fall on Thursday:

Weak global cues

US markets slumped on worries that US government debt would swell by trillions of dollars if Congress passes President Donald Trump's proposed tax-cut bill.

The S&P 500 fell 1.6% for a second straight drop after breaking a six-day winning streak. The Dow Jones Industrial Average lost 816 points, or 1.9%, while the Nasdaq Composite sank 1.4%.

The market turned sharply lower after the US government released the results for its latest auction of 20-year bonds.

The government regularly sells such bonds, which is how it borrows money to pay its bills. In this auction, the US government had to pay a yield as high as 5.047% to attract enough buyers to lend it a total of $16 billion over 20 years, news agency AP reported.

That helped push up yields for all kinds of other treasuries, including the more widely followed 10-year treasury. Its yield climbed to 4.59% from 4.48% late Tuesday and from just 4.01% early last month.

Rising bond yields lead to a flight of money from risk assets like equities to the safety of bonds.

Following a sharp fall on Wall Street, Asian markets were also trading lower, with Japan's Nikkei down 1.19%, Australia's S&P/ASX 200 down 0.55%, Hong Kong's Hang Seng declining 0.58% and South Korea's KOSPI falling 1.34%.

Heightened volatility and broad-based selling pressure

Back home, volatility spiked and selling pressure was visible across the board. All the major sector gauges compiled by the National Stock Exchange were trading lower, led by the NIFTY FMCG index's 1.5% fall. NIFTY Auto, IT, Oil & Gas, Consumer Durables and Pharma indices also fell over 1% each.

India VIX, the gauge of volatility, surged by 1.92% to 17.89.

Mid- and small-cap shares were also facing selling pressure as the NIFTY Midcap 100 index declined 0.50% and the NIFTY Smallcap 100 index fell 0.70%.

Heavyweights drag

Index heavyweights like Reliance Industries, HDFC Bank, ICICI Bank, ITC, Infosys, TCS and Mahindra & Mahindra were among the top drags on the SENSEX. They collectively wiped out over 350 points from the SENSEX.

Market breadth for NIFTY50 was extremely negative as 44 shares were falling while only six were advancing.

Power Grid was the top loser in the NIFTY50 basket of shares; the stock fell 2.58% to ₹288. Tech Mahindra (-1.68%), HCL Technologies (-1.57%), Nestle India (-1.49%) and Mahindra & Mahindra (-1.44%) were also among the losers.

On the flipside, IndusInd Bank, Jio Financial Services, Adani Ports, Adani Enterprises and Tata Steel were among the notable gainers.