Despite a steady start, stock markets crashed in the afternoon session on Tuesday as weak European markets and the impending expiry of derivatives later this week took a toll.
Benchmark indices lost over 2 per cent on Tuesday, with the BSE Sensex closing at 25,651.84, down 541 points, while the NSE Nifty lost 165 points to end the day at 7,812. Volatility shot up 11.92 per cent on the India VIX index, which closed at 20.3450.
With the Asian Development Bank saying that it expected weaker growth in China to cause a slowdown in the rest of Asia, metal stocks took a beating.
The CNX Metal index shed a massive 4.23 per cent, while the infrastructure index lost 3.46 per cent and the commodity index, 2.55 per cent.
Banking and financial indices lost close to 3 per cent each.
Benchmark indices in the UK, France and Germany all closed lower by 2 per cent on Tuesday. Market analysts believe Europe will continue to shape the direction of Indian markets, especially after the Greeks delivered a clear mandate to bring ex-Prime Minister Alexis Tsipras back to power.
Foreign investors sold heavily on Tuesday, offloading net equity worth ₹1,052.24 crore. Domestic institutions took the opportunity to buy, purchasing net equity worth ₹378.26 crore.
Anand James, Co-Head, Technical Research Desk, Geojit BNP Paribas Financial Services Ltd, said: “With F&O expiry round the corner and with a shortened week owing to Friday’s exchange holiday, the reluctance to push above last week’s peaks turned into a sharp sell-off, as nervous buyers withdrew swiftly.”
Commodity and metal companies such as Vedanta, Hindalco, Coal India and Jindal Steel were among Tuesday’s biggest losers. Wipro was the sole Nifty gainer, moving up 0.3 per cent at ₹594.