Indian stock market equity benchmarks, Sensex and Nifty 50, plummeted nearly 2% each on Monday amid broad-based selling across indices, led by midcap and smallcap indices. The overall market capitalisation of BSE-listed firms tumbled to around ₹439 lakh crore from ₹449 lakh crore as on November 1, eroding investors’ wealth by about ₹10 lakh crore in a single session.
The BSE Sensex declined as much as 1,492 points, or 1.87%, to hit a low of 78,233, while the NSE Nifty lost 488 points, or 2%, to 23,816 levels in the first two hours of trade so far. On the other hand, BSE midcap and smallcap indices nosedived 1.8% and 2.3%, respectively.
Out of 30 Sensex pack, barring Tech Mahindra and Mahindra and Mahindra, all 28 index heavyweights were flashing in red, led by Sun Pharma, Reliance Industries, Adani Ports, Tata Motors, and NTPC, falling in the range of 3-4%. Among others, Tata Steel, Power Grid, Bharti Airtel, JSW Steel, and Bajaj Finserv were notable losers.
On the sectoral front, all indices were floating in negative terrain, led by media, oil & gas, consumer durables, bank and financial services indices.
The sell-off in the domestic bourses was triggered by weak earnings growth reported by India Inc. and sustained selling by foreign institutional investors. Investors also turned jittery ahead of the U.S. presidential election results along with the spike in crude oil prices due to ongoing geopolitical tensions.
Key factors behind today’s fall
Weak corporate earnings
“The Indian market is facing headwinds from decelerating earnings growth. Nifty EPS growth as indicated by Q2 results may dip below 10% in FY25 which will render the present valuations of about 24 times estimated FY25 earnings, difficult to sustain. FIIs may continue to sell in this difficult earnings growth environment, constraining any rally in the market,” says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
"In the next couple of days markets globally will be focused on the US presidential elections and there can be near-term volatility in response to the election outcome. However, this is likely to be short-lived and economic fundamentals like US growth, inflation and the Fed action will influence the market trend,” he adds.
According to a latest report by Motilal Oswal, earnings of the 34 Nifty companies that have declared results so far have been flat year-on-year (YoY), with index heavyweights BPCL, JSW Steel, Coal India, IndusInd Bank, Reliance Industries, and Ultratech Cement contributing adversely to Nifty earnings. The earnings growth was impacted by global cyclicals, such as oil and gas (OMC’s profit plunged 92% YoY), which saw a dip of 58% YoY, along with Metals (-28% YoY), Cement (-41% YoY), Chemicals (-23% YoY), and Consumer (+3%).
Mixed Global cues
The mixed cues from global peers also fuelled uncertainty in the market. In the Asian market, China’s Shanghai Composite and Hong Kong’s Hang Seng index were trading lower, while South Korea’s Kospi and Australia’s ASX 200 edged higher today. Meanwhile, Japan’s markets were closed for a holiday.
On Friday, U.S. stocks closed higher ahead of the highly anticipated presidential election on Tuesday (November 5), while market participants also kept a close eye on the outcome and the Federal Reserve’s monetary policy decision in the week ahead. As per media report, former U.S. president and Republican opponent candidate Donald Trump and Democrat opponent & U.S. Vice President Kamala Harris are in a tight fight for the White House. The Dow Jones industrial average ended 0.69% higher on November 1, while the S&P 500 and Nasdaq added 0.41% and 0.8%, respectively.
Sustained FII selling
The record sell-off by foreign portfolio investors (FPIs) had a major impact on the domestic market. The FPIs sold equities worth ₹94,017 crore in October, which is the highest-ever in a month's time, as per NSDL data.
“This relentless selling contributed hugely to the about 8% decline in benchmark indices from the peak. However, FPIs were buyers in the primary market with an investment of Rs 19842 crores in October. It is important to understand that the primary market issues are mostly at fair valuations whereas the benchmark indices are trading at elevated valuations. This explains the duality in FPI behavior,” says Vijayakumar of Geojit Financial Services.
Technical outlook
Nifty and Sensex have resumed their downward trend after a week of consolidation, largely due to heavy selling by FIIs. The expectation of another stimulus package from China is driving fund outflows from India to China, while FIIs are also booking profits ahead of the significant upcoming U.S. elections. Additionally, DIIs appear to be on the sidelines amid these major global events.
“Both Nifty and Sensex are approaching their 200-DMAs, around 23500 and 77000, respectively, where a temporary bottom may form. Bank Nifty is showing relative resilience, supported by attractive valuations. Amid the current market pullback, investors are encouraged to focus on stocks with reasonable valuations and strong earnings momentum,” says Santosh Meena, Head of Research, Swastika Investmart.
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