Bears strengthen grip, indices shed over 1%; investors lose 6 lakh-cr

The Indian stock market witnessed an across-the-board selloff on Monday, with the benchmarks- the Sensex and the Nifty 50—crashing over 1 percent each and the mid-and small-cap segments plunging up to 2 percent.

The Sensex opened at 79,713.14 against a previous close of 79,724.12 and crashed nearly 2 percent to the level of 78,232.60. The Nifty 50 opened at 24,315.75 against its previous close of 24,304.35 and fell 2 percent to the level of 23,816.15.

Eventually, the Sensex closed 942 points, or 1.18 percent, lower at 78,782.24, while the Nifty 50 closed with a loss of 309 points, or 1.27 percent, at 23,995.35.

The BSE Midcap and Smallcap indices fell 1.31 percent and 1.65 percent, respectively.

Investors lose Rs 6 lakh-crore

The overall market capitalisation of BSE-listed firms dropped to nearly ₹442 lakh crore from ₹448 lakh crore in the previous session, making investors poorer by about ₹6 lakh crore in a single session.

In the Nifty 50 index, 42 stocks ended with losses, with shares of Hero MotoCorp, Grasim, Bajaj Auto, Adani Ports and Special Economic Zone, and BPCL as the top losers, falling 3-4 percent.

Mahindra and Mahindra, Tech Mahindra, Cipla, and SBI ended as the top gainers in the index, rising 1-2 percent.

Among the sectoral indices, Nifty Realty, Oil & Gas, and Media fell over 2 percent. Nifty Bank, Auto, Financial Services, FMCG, Metal, Private Bank, and Consumer Durables fell 1 percent.

What is driving the Indian stock market down today?

Experts pointed out these five key reasons behind the market crash today:

US election: The market is reacting to the US election-related nervousness. There is uncertainty about the outcome of the election as opinion polls indicate a tight fight between Democratic candidate Kamala Harris and Republican Donald Trump.

Still overvalued: Despite the recent correction, experts do not see a significant comfort on the valuation front. According to the equity research platform Trendlyne, the current PE (price-to-earnings) ratio of Nifty 50 at 22.7 is above the two-year average PE of 22.2 and near the one-year average PE of 22.7.

The Fed factor: The US Federal Reserve's policy outcome is scheduled for November 7, with experts anticipating a 25-basis-point rate cut. However, this may not move the market, as it is likely already priced in.

"Largely, the expectation is that the US Fed will go for a 25 bps cut, but all that could get negated because both the candidates of the US election are talking of a good amount of spending, so the fiscal deficit is going to be higher, which is why bond yields have jumped higher. This is not great news for the market," an analyst said.

Weak Q2 results: India Inc.’s September quarter results have been weaker than expected, raising investor concerns about the market outlook. "Earnings have been a bit soft, largely driven by commodities, which is impacting the overall market sentiment at this point," the analyst noted.

"The Indian market is facing headwinds from decelerating earnings growth. Nifty EPS (earning per share) growth, as indicated by Q2 results, may dip below 10 percent 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," said Geojit's Vijayakumar.

Sharp selloff by FPIs: The Indian stock market is witnessing a heavy selloff from foreign portfolio investors (FPIs), while domestic institutional investors (DIIs) are also cautious ahead of the major global events this week.

Downward trend

"The Nifty and the 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 US elections. Additionally, DIIs appear to be on the sidelines amid these major global events," said Santosh Meena of Swastika Investment.

(By arrangement with livemint.com)