Indian Market Crashes: Sensex tumbles 800 points, Nifty below 24,150

Investors should remain cautious

Indian Market Crashes: Sensex tumbles 800 points Selling pressure on Dalal Street intensified during Friday’s session, causing benchmark indices to drop more than one percent this week, resulting in a nearly 3% decline in the Nifty 50 index and a more significant drop in the broader markets.

The Sensex fell by 687 points (0.85%) to 79,370, while the Nifty dropped 261 points (1.07%) to 24,138.25 shortly after noon, marking the fifth consecutive day of declines. This downturn is attributed to lackluster earnings reports, continued foreign institutional investor (FII) outflows, and uncertainties surrounding the upcoming US elections.

Market sentiment is being negatively impacted by several factors, including relentless selling by FIIs, disappointing Q2 earnings, and global uncertainties, leading to a prolonged selloff.

In what’s been termed “Red October,” FIIs have continued to divest from equities, which has dampened overall market sentiment. On October 24, FIIs sold shares worth Rs 5,062 crore, adding to their nearly Rs 1 lakh crore in sales throughout October. This heavy selling coincides with increased tensions in the Middle East and a shift in emerging market investments towards China following recent stimulus announcements. Concerns over urban consumption and demand growth further exacerbate the situation, causing investors to be wary of potential short-term downturns.

Indian Market Crashes: Sensex tumbles 800 points  IndusInd Bank faced a significant decline, with its stock plummeting nearly 20% in today’s session, dropping it from the list of India’s top 10 most valued lenders by market capitalization. The bank reported a steep 40% drop in net profit to Rs 1,331 crore for the September 2024 quarter, prompting heavy selling.

Factors such as higher provisions, subdued growth in its high-yield loan portfolio, and declining other income contributed to these disappointing earnings. Major brokerages have also lowered their target prices for the stock, reflecting concerns about the bank’s near-term growth potential. IndusInd was the biggest loser among both Sensex and Nifty stocks, intensifying the overall market selloff.

In the US, treasury yields rose this week, leading to a risk-off sentiment in Asia as investors lowered their expectations for US Fed rate cuts. Upcoming US economic data on monthly payrolls may provide clarity, while the presidential race appears to be tightening between Donald Trump and Kamala Harris in key swing states. As investors prepare for potential volatility ahead of the US elections, Indian markets are feeling the effects.

Even the typically resilient FMCG sector, seen as a safe haven during turbulent market conditions, is facing challenges due to rising input costs, particularly in agricultural commodities, which are squeezing profit margins.

Experts advise against excessive concentration in small-cap stocks, recommending a more balanced approach to portfolio management.

Indian Market Crashes: Sensex tumbles 800 points  The Indian stock market faced a significant decline on Friday, with the BSE Sensex dropping over 700 points and the Nifty50 slipping below the 24,150 mark. By 12:12 PM, the BSE Sensex was at 79,402.23, down 663 points (0.83%), while the Nifty50 stood at 24,146.95, down 252 points (1.03%).

This downturn was largely driven by disappointing second-quarter earnings from major companies like IndusInd Bank and NTPC, as well as the ongoing exit of foreign investors from the Indian market. The overall market capitalization of all listed companies on the BSE saw a significant decline of Rs 7.7 lakh crore, bringing the total to Rs 436.1 lakh crore, according to an ET report.

Key heavyweight stocks contributing to the Sensex’s decline included IndusInd Bank, M&M, L&T, ICICI Bank, Reliance Industries, HDFC Bank, SBI, and NTPC. Several sectors, including Nifty Auto, Bank, Metal, PSU Bank, Realty, and Consumer Durables, experienced losses ranging from 2% to 3.6%. The India VIX, a measure of market volatility, surged by 5.9% to reach 14.8.

Indian Market Crashes: Sensex tumbles 800 points  The lackluster second-quarter results from various blue-chip companies left investors feeling dissatisfied and put additional pressure on the benchmark indices. “The consensus downward revision in FY25 earnings estimates and the weak Q2 numbers have soured sentiment, shifting it to a slightly bearish mode,” noted Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Foreign institutional investors (FIIs) have been selling Indian shares for the past 19 sessions, reallocating their investments to China due to the country’s stimulus measures and comparatively cheaper valuations. As of October 24, FIIs had offloaded Rs 98,085 crore from the Indian market.

Additionally, the elevated 10-year Treasury yield, which remains above 4%, along with a strengthening dollar index, has negatively affected the Indian equity market. These factors could trigger further foreign fund outflows and increase import costs, ultimately impacting corporate earnings.

The uncertainty surrounding the upcoming US elections has further compounded market concerns, with the tight race between former Republican President Donald Trump and Democratic Vice President Kamala Harris in key battleground states contributing to market volatility. Speculation regarding a potential Trump win in certain betting markets has supported US yields and the dollar, driven by the Republican candidate’s inflationary tax and tariff policies.

Indian equity indices sharply declined

Indian Market Crashes: Sensex tumbles 800 points Indian benchmark equity indices experienced a sharp decline on Friday, with the Sensex falling over 800 points and the Nifty dropping below the 24,150 level, driven by disappointing Q2 earnings and ongoing foreign outflows. Key contributors to the drop included lackluster results from private lender IndusInd Bank and power company NTPC.

The market capitalization of all listed companies on the BSE decreased by Rs 7.7 lakh crore, bringing the total to Rs 436.1 lakh crore. IndusInd Bank, M&M, L&T, and ICICI Bank were major contributors to the Sensex’s decline, which fell by 445 points. Other significant stocks like Reliance Industries, HDFC Bank, SBI, and NTPC also added to the downward pressure.

On the sectoral front, indices such as Nifty Auto, Bank, Metal, PSU Bank, Realty, and Consumer Durables fell between 2% and 3.6%. The India VIX, a gauge of market volatility, surged by 5.9% to reach 14.8.

Several factors contributed to the market selloff, including disappointing quarterly results from multiple blue-chip companies, which left investors feeling disillusioned. IndusInd Bank’s shares plummeted by 19%, contributing 130 points to the Sensex’s loss, while NTPC saw a 4% decline, both following their disappointing earnings reports.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “The consensus downward revision in FY25 earnings estimates and the weak Q2 numbers have soured sentiment, shifting it to a slightly bearish mode.” Foreign institutional investors (FIIs) have been consistently selling Indian shares for 19 sessions, reallocating their investments to China, influenced by the country’s stimulus measures and comparatively cheaper valuations. As of October 24, FIIs had offloaded Rs 98,085 crore from the Indian market.

While the 10-year Treasury yield eased to 4.1918% on Friday, following a four-basis-point drop in the previous session, it remains above 4%, having reached a three-month high of 4.26% earlier in the week. The dollar index, which measures the currency against six major peers, was relatively stable at 104.06, retreating from a three-month peak of 104.57 on Wednesday, although it has advanced by 0.56% over the week.

Indian Market Crashes: Sensex tumbles 800 points  Rising U.S. bond yields and a stronger dollar generally exert negative pressure on the Indian equity market, potentially triggering foreign fund outflows and increasing import costs, which can ultimately affect corporate earnings. The upcoming U.S. election adds further uncertainty, with former Republican President Donald Trump and Democratic Vice President Kamala Harris in a tight race for key competitive states ahead of the November 5 voting day.

Speculation around a possible Trump win in certain betting markets has supported U.S. yields and the dollar in recent days, bolstered by the Republican candidate’s inflationary tax and tariff policies. Markets are currently anticipating a 95.1% chance of a 25-basis-point rate cut at the Fed’s November meeting, with only a 4.9% probability of the U.S. central bank maintaining current rates. Just a month ago, the market fully anticipated at least a 25-basis-point cut, with a 58.2% chance of a 50-basis-point reduction.