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New Delhi: The Indian stock market experienced a significant downturn today with the benchmark indices -the Sensex and Nifty 50 – declining by nearly one percent each. The Sensex fell by 663 points, or 0.83 per cent, closing at 79,402.29, while the Nifty 50 dropped by 219 points, or 0.90 per cent, to end at 24,180.80. The mid-cap and small-cap sectors were hit even harder, with declines of 1.48 per cent and 2.44 per cent, respectively.
Investors Loss
The overall market capitalization of companies listed on the Bombay Stock Exchange (BSE) shrank to approximately Rs 438 lakh crore from nearly Rs 444 lakh crore in the previous session. Today’s downturn has resulted in a loss of about Rs 6 lakh crore for investors in just one day. The volatility index, India VIX, surged nearly 5 per cent to 14.63. This marked the fifth consecutive session of losses for both the Sensex and Nifty 50, with the former down 2.2 per cent and the latter 2.7 per cent for the week. Both indices are now about 8 per cent lower than their all-time highs reached on September 27.
There are several reasons behind the crash of the Indian stock market. Here are the few details:
Heavy Foreign Capital Outflow
There has been aggressive selling by foreign portfolio investors (FPIs), who sold Indian equities worth over Rs 98,000 crore in October alone. Many FPIs are redirecting their investments to Chinese stocks, drawn by cheaper valuations and recent measures from Beijing to stabilize its economy.
Weak Q2 Earnings
The September quarter earnings for many Indian companies have disappointed investors, raising concerns about high market valuations.
Rising Oil Prices
Oil prices have increased following OPEC+ decisions to delay a planned output hike due to soft demand. Brent crude rose by $1.18 per barrel to $74.28, while U.S. West Texas Intermediate climbed by $1.20 per barrel to $70.69.
Geopolitical Factors
Tensions in the Middle East are influencing market behavior. Recent military actions in Israel and discussions about a Gaza ceasefire are adding to the overall uncertainty.
US Election 2024
Uncertainty surrounding the upcoming US presidential election is impacting market sentiment. Recent opinion polls indicate a close race between candidates Kamala Harris and Donald Trump, causing anxiety among investors.
Valuation Concerns
Experts highlight that the market’s current price-to-earnings (PE) ratio for the Nifty 50 is 22.8, which exceeds its average PE ratios over the past one and two years, indicating that valuations may still be uncomfortable for many investors.