Today’s stock market crash: The Sensex and Nifty 50 both fell over 2% as the Indian stock market experienced a widespread selloff. A Rs. 9 lakh crore drop in market capitalization resulted from a 2% dip in mid and small-cap indices.
Stock Market Crash: On Monday, November 4, the Indian stock market saw a general selloff, with the benchmarks, the Sensex and the Nifty 50, plummeting by about 2% each and the mid- and small-cap divisions falling by more than 2%.
The Sensex began trading at 79,713.14, after closing at 79,724.12, and plummeted by almost 2% to 78,232.60. Compared to its previous closing of 24,304.35, the Nifty 50 began at 24,315.75 and dropped 2% to 23,816.15.
Conversely, the BSE Smallcap and Midcap indices experienced a 2% decline.
Investors lost about Rs. 9 lakh crore in a single session as the total market capitalization of BSE-listed companies fell to almost Rs. 439 lakh crore from Rs.448 lakh crore in the previous session.
Today’s sectorial indexes
The sectors indices saw a two to three percent decline in Nifty Oil & Gas, Media, Consumer Durables, and Realty, and a one percent decline in Nifty Bank, Auto, FMCG, Metal, FMCG, and PSU Bank.
What is behind today’s decline in the Indian stock market?
The following five major causes of today’s stock market crash were identified by experts:
1. Exercise caution before the US election
The market is responding to the anxiety surrounding the US election. Opinion surveys suggest a close contest between Republican Donald Trump and Democratic nominee Kamala Harris, raising questions about the election’s result.
“The US presidential election will be the focus of markets around the world in the coming days, and the outcome of the election may cause short-term volatility. This is probably only going to last a short while, though, and the market movement will be influenced by economic fundamentals like US growth, inflation, and Fed policy,” stated V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
2. Uncomfortable valuations
Experts do not believe that the valuation situation has significantly improved despite the recent drop. The price-to-earnings (PE) ratio of the Nifty 50 is currently at 22.7, which is higher than the two-year average of 22.2 and close to the one-year average of 22.7, according to the equity research platform Trendlyne.
“The market’s overall rich multiples have not changed much as a result of the recent drop. The comfort and long-term progress of India are major reasons why they are here to stay. “Since stock-specific corrections have been significantly higher, things have improved significantly,” stated Pankaj Pandey, ICICI Securities’ head of research.
3. The Fed’s role
Experts predict a 25bp rate drop at the US Federal Reserve’s policy announcement on November 7. But since the market is probably already priced in, this might not affect it.
The US Fed is expected to decrease interest rates by 25bp, but this could be nullified because both of the contenders for the US election are talking about significant spending, which would result in a larger fiscal deficit and higher bond yields. According to Pandey, this is bad news for the market and raises concerns about a potential stock market crash.
4. Poor Q2 results
Investors are worried about the market outlook after India Inc.’s September quarter earnings were below expectations, fueling concerns of a possible stock market crash.
“Earnings have been a bit soft, largely driven by commodities, which is impacting the overall market sentiment at this point in time,” Pandey stated.
“Decelerating earnings growth is posing challenges for the Indian market. According to Q2 statistics, Nifty EPS (profits per share) growth may fall below 10% in FY25, making it challenging to maintain the current prices of roughly 24 times projected FY25 earnings. In this challenging profits growth environment, FIIs would keep selling, which would limit any market rally, according to Vijayakumar.
5. FPIs’ steep selloff
In anticipation of this week’s significant international events, domestic institutional investors (DIIs) are also being cautious, while foreign portfolio investors (FPIs) are selling off heavily in the Indian stock market, which is contributing to fears of a potential stock market crash.
After a week of stability, the Nifty and Sensex have started to decline again, mostly as a result of strong FII selling. In addition to FIIs booking profits ahead of the crucial forthcoming US elections, money outflows from India to China are being driven by the prospect of another stimulus package from China. Furthermore, it seems like DIIs are ignoring these significant world events,” stated Santosh Meena, Head of Research at Swastika Investmart.
Nifty 50 technical outlook
According to experts, the Indian stock market has recently tried multiple times to reverse the downward trend, but it has failed due to a lack of new catalysts, raising concerns about a potential stock market crash.
While the 24,150 mark held firm several times last week, halting additional falls, Anand James, Chief Market Strategist at Geojit Financial Services, pointed out that the upward momentum was very feeble. Resistance in the 24,470–24,540 range was the cause of this, with other barriers close by at 24,660–24,770.
Although we anticipate that these levels will be tested this week, the overall trend now necessitates several days of closing above 25,100 in order to completely give up on the sell-on-rallies strategy, which is still the prevailing theme. Alternatively, a direct decline below 24,150 or the failure to float over 24,470 will reveal 23,900–23,300. In any case, James stated that the Nifty 50 looks poised to exit the 24,150–24,470 range this week.
