Overnight panic sell-off in US equity markets triggered a virtual bloodbath across all global exchanges from Asia to Europe till afternoon on Tuesday.  In Dalal Street, within seconds of the opening bell nearly `6 lakh crore was wiped out from investors wealth.

In one of the worst-ever bear hammerings, the 30-share Sensitive Index of Bombay Stock Exchange crashed 1,274.35 points to 33,482.81 points. The broader market’s 50-scrip Nifty of National Stock Exchange plunged to 10,276.30 (-390.25) points.

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Early warning of an imminent collapse came from Singapore Stock Exchange where Nifty futures fell sharply by over 330 points. The panic button was pressed right in advance, say analysts.

These indices staged a strong comeback in late trade wiping out two-third of the day’s losses. Comparatively the Indian market emerged as a better performer in trying conditions among all its peers.

With investors confidence at its lowest, market experts are yet not sure about how long the rising sovereign bond yields spreading from the United States to other developed and emerging market economies or EMEs would continue to take a toll of capital markets that have been enjoying a prolonged bullish run for nearly seven years without suffering a confidence-sapping correction of such magnitude.

Nevertheless the bull lobby, wisened by the rude setback, claims the downside would be checked sooner than expected on account of improving earnings by corporate and financial sectors for the first time in three years.

The optimists also cite the latest impressive US job data with increasing wages in the first year of Donald Trump as President. Analysts say equity and money markets are looking ahead to Wednesday’s monetary policy statement by the Reserve Bank of India which they expect to unravel intricacies of present crisis in global debt market The Sensex managed to close with pared losses at 34,195.94 (-561.22) points down 1.61 per cent.

Nifty slipped 1.58 per cent to end 10,498.25 (-168.30) points. Nifty Bank cracked 1.10 per cent to settle at 25,811.30 (-287.45) points. In the Sensex, 28 shares were down and three up. For Nifty it was 45:five. Analysts lauded the sharp recovery in indices from the day’s low with panic giving way to renewed hope.

First and foremost, under such massive sell-off, the exchanges were quick to allay fears over margin money crisis. Both exchange managements clarified that they have been collecting nearly 20 per cent additional margin deposits from brokers for the past fortnight in the run up to the Budget 2018-19 presentation.

The exchanges were prodded by the capital market regulator Securities and Exchange Board of India to start collecting additional margin money as a buffer to avoid defaults in the over-bought market.

The benchmarks have been creating new high records with each passing session defying macros or fundamentals purely on liquidity supply by mutual funds. Elsewhere in Asia, Nikkei was down 4.73 per cent at 21,610.24 (-1,071.84) points, Hang Seng 30,598.42 (-1,649.80) points, -5.12 per cent, Shanghai Composite 3,369.31 (-117.79) points, -3.38 per cent and Straits Times 3,406.38 (-76.55) points, -2.20 per cent.

Analysts are veering to an overwhelming opinion that the domestic market cracked more on account of global bond yields crisis than the imposition of Long Term Capital Gains Tax on more than `one lakh returns accrued from stock trading. Regardless of stocks being under free fall , Finance Secretary Hasmukh Adhia again ruled out possible re-thinking on LTCG Tax.
The market participants now appear to have reconciled to LTCG Tax since the indices have undergone necessary correction.

Globally, sovereign bonds are considered as risk free investment in contrast to vulnerable equity market. Analysing the prevailing conditions in Dalal Street, global bank BNP Paribas MF’s Ritesh jain commented, “Indian markets are mirroring the free fall in the US equities.

The start of quantitative tightening by the US Fed, fear of inflation firming up and hardening bond yields led to an increase in the US VIX (volatility index) and sent the US markets spiralling down in the last half hour of trade with futures down sharply post market hours.

Momentum strategies added to domino effect…the market now completely turned from “greed to fear” which should settle down hopefully in next few days once leveraged positions are wound-down . Wait and watch situation until then.”

Even as analysts see equity markets returning to ” goldilocks” (neither overheated nor too cool) thanks to flare up in sovereign bonds yields, domestic broker Sharekhan’s Hemang Jain said the indices are under “meaningful correction”.

If investors have surplus funds they should allocate them for fresh buying sooner than later. Another positive is it is taking place when earnings growth is reviving after three years. Stocks such as L&T, Maruti Suzuki India, HDFC and HDFC Bank are some of the shares worthy of investment.

Exceptional gainers in the BSE benchmark were Bharti Airtel `441, 0.34 per cent and Tata Steel `666, 0.22 per cent. Losers’ list included Tata Motors `375, -5.31 per cent; TCS `3,004.95, -3.27 per cent; Kotak Mahindra Bank `1,035, -2.57; and HUL `1,335, -1.72 per cent.