India’s benchmark index, Sensex, has once again erased all the gains it made in the last seven and a half months.
China, of course, is the big reason. Equity markets across Asia tanked on Aug. 21 after the Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) survey showed China’s manufacturing sector dropped to a six year low. US and European index futures fell too.
The Sensex index dropped 241.75 points or 0.88% to close at 27,366.07 points. This the lowest closing level in about two months. From Jan.1, 2015, the Sensex is down 0.5%.
This is not the first time that all the gains made in the year have been erased. The Indian equity markets had seen such volatility in June. That was mainly because the Greek debt crisis was at its peak. In March too, the Sensex had seen a huge drop after Saudi Arabia carried out air strikes on Yemen, spooking global investors.
Much of the buoyancy in the Indian equity markets this year was fueled by expectations that the Narendra Modi government will finally undertake reforms including the passing of the land acquisition bill and the goods and services tax.
But a year has passed since Modi took over the reins of Asia’s third largest economy, and hardly any of those promises have materialized.
Now, a global commodity slump and a potential slowdown in China is spoiling the party, leading to a sell-off. The devaluation of the Chinese currency is adding fuel to the fire.