Explore the reasons behind the Indian stock market’s recent decline amidst Lok Sabha elections, FIIs’ selling, hawkish US Fed, lackluster Q4 results 2024, and rising VIX Index.
Introduction
The Indian stock market witnessed a tumultuous journey, marked by a persistent downward trend for the fifth consecutive session. As the Nifty 50 and Sensex plunged, concerns rippled across Dalal Street. In this article, we delve into the core reasons behind this downturn, offering insights from seasoned experts in the field.
Understanding the Market Plunge
The trading day of May 9, 2024, unfolded with grim news for investors. The Nifty 50 index commenced lower, signaling a troubling trend. By day’s end, both the Nifty 50 and BSE Sensex indices recorded significant losses, reinforcing a disquieting pattern of decline.
The Nifty Bank Index Under Pressure
Adding to the apprehension, the Nifty Bank index bore the brunt of consecutive selling sessions, enduring a substantial loss of 1900 points. Analysts attribute this downturn to a confluence of factors that have cast a shadow over the Indian stock market.
Reasons Behind the Stock Market Decline
1. Lok Sabha Elections
Experts assert that the Indian stock market had priced in the anticipated victory of the BJP-led NDA in the ongoing Lok Sabha polls. This foresight, coupled with an overbought market condition, triggered premature profit booking on Dalal Street. Notably, the selling pressure primarily affected frontline large-cap stocks, while the broader market witnessed a surge in small-cap and mid-cap indices.
2. Foreign Institutional Investors (FIIs) Selling
May 2024 witnessed a pronounced trend of heavy selling by FIIs. Net sellers across all sessions, FIIs divested Indian shares amounting to ₹15,863 crore in the cash segment and ₹5,292 crore in the Future & Option (F&O) segment. This significant offloading of shares exacerbated the market’s downward trajectory.
3. Hawkish US Federal Reserve
Recent hawkish rhetoric from select US Fed officials exerted additional strain on Indian stocks. These statements catalyzed a rebound in the US dollar rate, consequently fueling US Treasury yields. With investors redirecting funds towards currency and treasury markets, equity investments faced heightened scrutiny and potential divestment.
4. Lackluster Q4 2024 Results
The Q4 results for the 2024 season failed to inspire confidence or stimulate buying activity on Dalal Street. With market expectations already factored in, the absence of positive surprises prompted investors to capitalize on existing positions, contributing to the ongoing sell-off.
5. Escalating VIX Index
A sustained uptrend in the VIX Index introduced uncertainty among prospective buyers, dissuading fresh investment in a volatile market environment. As the Lok Sabha elections progressed, the VIX Index’s historical tendency to surge intensified apprehensions, further dampening market sentiment.
Conclusion
The Indian stock market’s recent downturn reflects a culmination of diverse factors, each contributing to a pervasive sense of unease among investors. As stakeholders navigate this challenging landscape, a nuanced understanding of these underlying dynamics becomes imperative for informed decision-making.
Disclaimer
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