Stock market crash: After logging a bounce back on Friday last week, the Indian stock market again came under the selling pressure as frontline indices lost up to one percent in early morning session. The Nifty 50 index opened lower at the 22,027 mark and touched the intraday low of 21,821, whereas the BSE Sensex opened lower and touched an intraday low of 71,866. The Bank Nifty index also had a gap down, opening at 47,389, and the index touched an intraday low of 46,983. In the broader market, selling was more profound as the small-cap stock crashed to 1.85 percent while the mid-cap index tanked around 1.75 percent during morning deals. Meanwhile, the India VIX today witnessed a sharp rise and touched a new 52-week high of 21.41.
The share market is down today due to a combination of factors including rising volatility, ongoing Lok Sabha elections, non-impressive Q4 results, continuous selling by FIIs, and the US dollar rates sustaining above 105 mark. These factors have led to a significant decrease in investor confidence, resulting in a bearish market sentiment.
Delving deeper into the reasons for the falling Indian stock market, Avinash Gorakshkar, Head of Research at Profitmart Securities, has provided insightful analysis. He has identified two major factors: the rising volatility due to ongoing Lok Sabha elections and the India VIX reaching a new 52-week high. He also highlighted other significant factors such as continuous selling by FIIs, non-impressive Q4 results, and the US dollar rates sustaining above the 105 mark. This expert analysis can help investors navigate these challenging times.
Why the market is falling: Top 5 reasons
1] Rising India VIX Index: "The Indian volatility index India VIX today touched a new 52-week high of 21.41, logging over 70 percent rise in one month. The index is facing a hurdle at the 22 markets, and upon decisively breaching this resistance, the volatility index may soon touch the 23 and 25 marks. This has triggered the fear factor on Dalal Street, leading to sharp sales in the Indian stock market," said Sumeet Bagadia, Executive Director at Choice Broking.
The continuous rise in the VIX Index has cast a shadow of doubt among stock market investors. As the India VIX Index has a history of climbing during Lok Sabha elections and we are just in the middle of general elections 2024, the volatility is expected to pick up further when we come close to the poll results date. This potential future impact underscores the need for investors to stay vigilant and consider proactive measures.
2] Ongoing Lok Sabha elections: "The fourth phase of the Indian general elections is underway, and the market is under the uncertainty stress of Lok Sabha elections results, scheduled on 4th June 2024. So, the market is shedding the heavy positions as most of the indices are overbought," said Saurabh Jain, Vice President — Research at SMC Global Securities.
3] Continuous selling by Foreign Institutional Investors (FIIs): "FIIs are selling heavily this month as they have remained net sellers on all sessions in May 2024. They have sold out Indian shares worth ₹24,975 crore in the cash segment till Friday last week while the FIIs have sold out shares worth ₹11,279 crore in the Future & Option (F&O) segment. This continuous selling by FIIs, who are major players in the Indian stock market, has significantly contributed to the market's decline," said Avinash Gorakshkar of Profitmart Securities.
4] Non-impressive Q4FY24 results: "The Q4 results for the 2024 season have gone without surprise. As the market had already discounted the Q4 results 2024 ahead of the quarterly results season, investors are booking profit now as the season is about to end next week," said Saurabh Jain of SMC Global Securities.
5] Strong US dollar: "After the sell-off trigger in the currency market, the US dollar rate has remained strong above 105 level that has paused further selling in the currency and bond market. This has also triggered selling in the equity market in India," said Saurabh Jain of SMC Global Securities.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, and not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circ*mstances may vary.
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First Published:
13 May 2024, 10:51 AM IST
