Sensex Slump: Understanding the Stock Market Decline Ahead of the 2024 Lok Sabha Election Results
In the days leading up to the 2024 Lok Sabha election results, the Indian stock market has experienced significant volatility. Today, the India VIX index spiked to an intraday high of 24.52, marking an almost 90% increase over the past month. As voters prepare for the final phase of the elections this Saturday, this evening anticipates exit polls. However, the stock market’s weak performance has persisted for five consecutive sessions. The BSE Sensex opened lower today, reaching an intraday low of 74,133 and recording a 1200-point drop over the past three days.
Key Factors Contributing to the Sensex Slump
Market experts attribute the recent downturn to several factors:
- Election Outcome Uncertainty: Avinash Gorakshkar, Head of Research at Profitmart Securities, highlights that the rising India VIX indicates expected volatility until the election results are announced. “The market remains uncertain about the post-election government, leading to continued declines,” he explains.
- Rising US Treasury Yields: Siddhartha Khemka, Head of Retail Research at Motilal Oswal, points out that strong consumer confidence data and hawkish comments from US Fed officials have driven US Treasury yields to a one-month high. However, despite reduced FII selling, caution prevails as the election outcome approaches, prompting profit booking,” he notes.
- Middle East Tensions: Deepak Jasani, Head of Retail Research at HDFC Securities, observes that global equities fell due to increased bond yields and a surge in oil prices amid heightened Middle East tensions. “Concerns over sustained high interest rates are impacting market sentiment,” he says.
- Monthly Expiry: Gorakshkar from Profitmart Securities also attributes the fall to the monthly expiry. “The slow roll-over rate in early deals has contributed to the dip, though a recovery is expected in the second half,” he adds.
- Diminished Hopes for US Fed Rate Cuts: The Fed’s hawkish stance reflects the pressure on US inflation from rising crude oil prices and Middle East tensions. Gorakshkar explains, “In a high-interest-rate environment, US assets are more attractive, leading to reduced investment in equities and other assets, impacting the Indian stock market.”
Understanding these factors provides insight into the market’s behavior ahead of the critical election results.
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