Stock market slumps as inflation soars and selling pressure builds

The market has entered a correction phase, with no clear indication of how long it will last or if it will fall into a bear market. However, it's widely believed that the Indian economy and markets will improve over the medium to long term. The current decline in sales and profits of companies is expected to be temporary, leading many to advise buying stocks at lower prices. 

Retail inflation has breached the ceiling, and expectations of an interest rate cut became more prominent after February. By that time, Reserve Bank Governor Shaktikanta Das’s second term will have ended, and a new governor will take over. U.S. inflation came in as expected, boosting hopes of a rate cut there in December. Despite this, the U.S. market was volatile yesterday, and Asian markets showed slight gains today.

In the derivatives market, the Nifty closed at 23,666 on Wednesday, falling to 23,620 this morning, suggesting a negative start for the Indian market today. The U.S. markets were mixed, with the Dow and S&P seeing small gains, while the Nasdaq declined. October's retail price increase matched expectations, with annual growth at 2.6 percent and a monthly rise of 0.2 percent, keeping hopes of a December rate cut alive.

The Dow Jones rose by 47.21 points (0.11%) to 43,958.19 on Wednesday, while the S&P edged up by 1.39 points (0.02%) to 5,985.38. The Nasdaq, however, closed down by 50.68 points (0.26%) to 19,230.72. U.S. futures are slightly up today, but the Dow, S&P, and Nasdaq all show modest declines. U.S. 10-year Treasury yields have dropped to 4.473%, signaling that interest rates may remain high.

Global markets

European markets were slightly down on Wednesday, marking a second consecutive decline. On the other hand, Asian markets showed some improvement, with Japan's Nikkei rising by 0.75% and South Korea and Australia also up by around half a percent. 

Indian market

The Indian market has fallen into correction territory, down more than 10% from its record high. The Nifty 50 index closed down 10.14% from its high on September 27. Mid-cap and small-cap indices saw greater losses, with the Mid-Cap 100 down 11.59% and the Small-Cap 100 down 10.69%. The Sensex has fallen by 9.49% since hitting its record low. The total market capitalization of BSE-listed companies dropped to Rs 429.9 lakh crore, from Rs 477.9 lakh crore on September 27, showing a Rs 48 lakh crore loss.

Selling by foreign investors and disappointing second-quarter results have contributed to the decline. Retail price increases have also diminished the prospects of an immediate interest rate cut. However, investment experts believe that this market downturn presents a good opportunity to buy quality stocks at lower prices, anticipating a recovery in the fourth quarter.

The Indian market saw further declines after trading in losses yesterday, with heavy selling pressure in the afternoon. All major sectors, including realty, auto, banking, finance, metals, oil & gas, healthcare, FMCG, pharma, media, and consumer durables, saw declines. Mid-cap and small-cap stocks fell by about 3%. On the BSE, 599 stocks rose, while 3,384 fell. On the NSE, 419 rose and 2,419 fell. The Nifty closed down by 324.40 points (1.36%) at 23,559.05, while the Sensex lost 984.23 points (1.25%) to close at 77,690.95. Bank Nifty dropped 2.09%, and mid- and small-cap indices fell by over 2.5%.

Foreign investors sold a net Rs 2,502.58 crore in the cash market, while domestic investors and institutions bought Rs 6,145.24 crore worth of shares. The Nifty’s support level has now fallen to 23,540, its 200-day Exponential Moving Average (EMA). If it fails to hold there, it could drop further to 23,200. Resistance levels for the Nifty are at 23,790 and 23,875.

Gold update

Gold prices continue to fall, partly due to the rising dollar. On Wednesday, gold dropped 0.98% to $2,573.30 per ounce, and by this morning, it had fallen further to $2,568. In Kerala, the price of gold dropped by Rs 320 to Rs 56,360. Silver also fell to $30.34 per ounce. The U.S. dollar strengthened, with the dollar index rising by 0.42% to 106.48, and the rupee struggled to hold at Rs 84.38 against the dollar, expected to rise to Rs 84.50-84.60 by the end of the month.

Crude oil prices saw a slight increase. Brent crude settled at $72.03 per barrel, rising to $72.15 this morning, while WTI crude stood at $68.25, and UAE Murban crude was at $71.62. Cryptocurrencies surged yesterday, with Bitcoin reaching a record high of $93,469.08 before dropping back to $90,500, while Ether peaked at $3,338 before falling below $3,200. Industrial metals fell again, with copper down by 1.04%, aluminum down 1.27%, and nickel and tin falling by over 1%.

Market indicators

Sensex 30: 77,690.95 -1.25%

Nifty50: 23,559.05 -1.36%

Bank Nifty: 50,088.35 -2.09%

Midcap 100: 53,800.85 -2.64%

Smallcap 100: 17,458.90 -2.96%

Dow Jones: 43,958.19 +0.11%

S&P: 5985.38 +0.02%

Nasdaq: 19,230.72 -0.26%

Dollar($): ₹84.38 -₹0.01

Dollar index: 106.48 +0.46

Gold (oz):  $2573.30 -$25.50

Gold (Pavan):  ₹56,360 -₹320

Crude (Brent) oil: $72.03 +$00.27