Indian Market Crashes: Sensex & Nifty Plunge 1% Amid FPI Outflows and Weak Earnings

Indian Market Faces Significant Selloff

Indian Market Crashes: Sensex & Nifty Plunge 1%  On Friday, October 25, the Indian stock market saw a significant selloff, with benchmark indices Sensex and Nifty 50 both declining by around 1% during intraday trading. The Sensex dropped 709 points, or 0.90%, to settle at 79,356, while the Nifty 50 fell by 1.2% to close at 24,113. Meanwhile, the BSE Midcap and Smallcap indices lost 2.6% and 3.2%, respectively, during the session.

The overall market value of companies listed on the BSE dropped from approximately ₹444 lakh crore to ₹435 lakh crore, erasing about ₹9 lakh crore in investor wealth. The India VIX volatility index also rose by over 7%, indicating growing market uncertainty.

Nifty 50 has now declined for five consecutive sessions, and it is down more than 8% from its all-time high of 26,277.35, which was recorded on September 27. Five key factors appear to be driving this downturn:

1. Heavy Foreign Selling: Aggressive sales by foreign portfolio investors (FPIs) have played a significant role. FPIs offloaded over ₹98,000 crore in Indian equities in October, redirecting funds to Chinese markets after measures from Beijing aimed to revitalize its economy.

2. Weak Corporate Earnings: India’s September quarter earnings have disappointed, with reports from Kotak Institutional Equities highlighting weaker trends across several sectors and concerns about potential disruptions affecting profitability.

3. US Election Uncertainty: With the November 5 US election approaching, market participants are watching closely, as differing policy approaches from candidates Kamala Harris and Donald Trump could impact international trade and market sentiment.

4. Geopolitical Tensions: The ongoing conflict in the Middle East continues to weigh on markets. Reports on renewed talks between US and Israeli authorities for a Gaza ceasefire have added to market nervousness.

These factors have contributed to a challenging market environment, with growing caution among investors and a trend toward bearish sentiment.

Indian Market Crashes: Sensex & Nifty Plunge 1%  On Friday, October 25, Indian stocks faced a sharp decline amid weak quarterly results and continuous foreign investor outflows. By 11:06 AM, the S&P BSE Sensex was down by 606 points, or 0.76%, trading at 79,458.96, while the NSE Nifty50 dropped by 238.35 points to 24,161.05.

Foreign investors (FIIs and FPIs) net sold equities worth ₹5,062.45 crore on Thursday, whereas domestic institutional investors (DIIs) net bought shares totaling ₹3,620.47 crore. For October, foreign investor sales have reached ₹97,205.42 crore.

Top gainers on the NSE included ITC, Axis Bank, Asian Paints, ICICI Bank, and Britannia. However, IndusInd Bank, NTPC, L&T, M&M, and Shriram Finance led the declines. IndusInd Bank’s shares plunged nearly 18% to ₹1,052.05 on the BSE, impacted by a weak quarterly report showing a sharp 87% YoY rise in provisions to ₹1,820 crore from ₹974 crore in the same period last year.

In contrast, ITC rose by 4% to ₹490.30 following positive quarterly results. NTPC shares fell nearly 4% to ₹396 after reporting a 14% YoY increase in net profit to ₹5,380.25 crore but a slight dip in total income.

The BSE MidCap index was down by 1.55% at 45,419.81, while the SmallCap index dropped 2.20% to 52,463.13. Most sector indices were negative, with the metal and consumer durables sectors leading the losses. The BSE Metal index fell by 1.92% to 30,942.88, and the Consumer Durables index declined by 1.94% to 61,684.84.

Internationally, the dollar weakened after a significant drop, reflecting a retreat in U.S. Treasury yields from recent highs. Asian markets showed mixed results: Hong Kong’s Hang Seng gained, while Japan’s Nikkei fell following a rebound in the yen against the dollar.

Indian equity indices took a significant hit

Indian Market Crashes: Sensex & Nifty Plunge 1% On Friday, Indian equity indices took a significant hit, with the Sensex dropping over 700 points and the Nifty slipping below 24,150 due to weak Q2 earnings and continued foreign outflows. The decline was largely influenced by disappointing results from private lender IndusInd Bank and power company NTPC.

The market capitalization of all BSE-listed firms fell by Rs 7.7 lakh crore to Rs 436.1 lakh crore. Stocks like IndusInd Bank, M&M, L&T, and ICICI Bank collectively pulled the Sensex down by 445 points. Additional declines from Reliance Industries, HDFC Bank, SBI, and NTPC added to the downturn.

Sectorally, Nifty Auto, Bank, Metal, PSU Bank, Realty, and Consumer Durables dropped between 2% and 3.6%. The India VIX volatility index rose 5.9%, reaching 14.8, signaling increased investor caution.

Key Drivers of the Market Decline
– Weak Q2 Earnings: Disappointing quarterly results from several large-cap stocks dampened investor sentiment. IndusInd Bank’s 19% drop alone accounted for 130 points of the Sensex loss, while NTPC shed 4%.

– Sustained Foreign Outflows: FIIs have sold Indian shares for 19 consecutive sessions, redirecting funds toward Chinese markets, which currently offer cheaper valuations following Beijing’s recent economic stimulus.

– High U.S. Bond Yields: The 10-year U.S. Treasury yield declined to 4.1918% but remains elevated above 4%, impacting foreign fund flows to Indian markets. Rising U.S. bond yields and a stronger dollar typically lead to foreign outflows from emerging markets and increased import costs, which can affect corporate profits.

– Upcoming U.S. Election: The U.S. election on November 5 adds to market uncertainty. Polls show a close race between former President Donald Trump and Vice President Kamala Harris. Speculation of a potential Trump win has bolstered U.S. yields and the dollar, as his policy stance favors tax and tariff increases.

Indian Market Crashes: Sensex & Nifty Plunge 1%  The Fed is widely expected to implement a 25-basis-point rate cut at its upcoming November meeting, with only a 4.9% chance that rates will be held steady, as per CME’s FedWatch Tool. Rising rates and economic uncertainties in the U.S. further contribute to cautious investor sentiment in the Indian market.