Amidst a tumultuous trading session, the Indian stock market witnessed a significant downturn today, with frontline indices shedding up to one percent in early trade. The Nifty 50 index opened at 22,027 and hit an intraday low of 21,821, while the BSE Sensex also opened lower, touching a low of 71,866. Concurrently, the Bank Nifty index experienced a gap down, starting at 47,389 and reaching an intraday low of 46,983. Small-cap stocks plummeted by 1.85 percent, and the mid-cap index saw a decline of around 1.75 percent during the morning session. Adding to the apprehension, the India VIX surged, marking a new 52-week high of 21.41.
Multiple factors converged to drive this downward spiral in the market. Rising volatility, heightened by the ongoing Lok Sabha elections, lackluster Q4 results, persistent selling by FIIs, and the sustenance of the US dollar above the 105 mark collectively eroded investor confidence, fostering a bearish sentiment.
An in-depth analysis by Avinash Gorakshkar, Head of Research at Profitmart Securities, reveals two primary drivers behind the market’s decline: escalating volatility due to the elections and the India VIX hitting a new high. Additionally, continuous FII sell-offs, disappointing Q4 figures, and the resilient US dollar further contributed to the market downturn. This insightful perspective aids investors in navigating the turbulent market landscape.
Key Reasons Behind the Stock Market Plunge:
1] Escalating India VIX Index: Sumeet Bagadia, Executive Director at Choice Broking, notes a staggering 70 percent surge in the India VIX over the past month, culminating in a new high of 21.41 today. The persistent ascent of the VIX has instilled fear among investors, triggering significant sell-offs in the market. The looming Lok Sabha elections exacerbate this volatility, hinting at further fluctuations as the polling date approaches.
2] Ongoing Lok Sabha Elections: With the fourth phase of the elections underway and results scheduled for June 4, 2024, market uncertainty prevails, prompting investors to divest from overbought indices.
3] FIIs’ Persistent Selling: Avinash Gorakshkar highlights FIIs‘ continuous sell-off, totaling ₹24,975 crore in the cash segment and ₹11,279 crore in the F&O segment for May 2024. This significant divestment by major market players has exerted downward pressure on the market.
4] Lackluster Q4FY24 Results: Saurabh Jain of SMC Global Securities underscores the absence of surprises in the Q4FY24 results, prompting profit booking as the earnings season nears its conclusion.
5] Resilient US Dollar: Saurabh Jain points out the US dollar’s strength above the 105 level, stemming further selling in the currency and bond markets and inciting equity market offloading in India.
Disclaimer: The insights provided herein represent the views of individual analysts or brokerage firms and not Mint. Investors are strongly advised to consult certified experts before making investment decisions, considering the rapidly changing Indian stock market dynamics and individual circumstances.
