Hyderabad: For stock market investors, today has turned out to be a 'terrifying' Thursday. With the BSE Sensex plunging below 72,500 level and Nifty slipping below a key support of 22,000, selling pressure seems to have intensified with 'uncertainty' being a key buzzword. Analysts indicate that this trend may continue in the stock market in the short term.
The market capitalisation of BSE listed companies slipped below Rs 400 lakh crore. The Q4 earnings and election uncertainty have dented the Street sentiments. The volatility index (VIX) India also spiked 6.5 per cent to 18.20 levels, gaining for an eleventh straight session.
Why is the stock market falling?
Speaking on the reasons for the drag on the Indian stock markets, Deepak Jasani, Head of Retail Research, HDFC Securities said, "Nifty ended sharply lower on May 09 led by institutional selling and trader squaring up due to nervousness on election progress. At close, Nifty was down 1.55% or 345 points at 21957.8. Cash market volumes on the NSE rose to Rs.1.02 lakh cr. Broad market indices fell more than the Nifty even as the advance decline ratio fell sharply to 0.17:1 (lowest since March 13, 2024)."
There are combinations of reasons that are dragging Indian indices together. Ongoing Lok Sabha polls, continuous selling by FIIs, not so impressive Q4 results season, hawkish US Fed and rising volatility index (VIX) India can be attributed as one of the major reasons weighing on the Indian stock market these days.
Added Vinod Nair, Head of Research, Geojit Financial Services said "The broader market witnessed volatility, underscoring caution on account of Q4 earnings and general election uncertainties, which led investors to stay on the sidelines. We expect the trend to continue in the short term as the market slid below the psychological level of 22,000. The global indices are trading with mixed cues ahead of the BOE policy meeting later today and US inflation figures due next week."
FIIs' selling: Foreign Institutional Investors (FIIs) are selling heavily this month as they have remained net sellers on all sessions in May 2024. They have sold out Indian shares worth Rs 15,863 crore in the cash segment till Thursday while the FIIs have sold out shares worth Rs 5,292 crore in the Future & Option (F&O) segment.
Hawkish US Fed: Hawkish talks by some US Fed officials recently have put extra pressure on the Indian stocks. After witnessing some profit booking early this month, such statements enabled the US dollar rate to rebound. Rising US dollar prices have fuelled the US Treasury yield as well. So, investors are expected to switch money from equity and other assets to currency and treasury markets.
Jasani added, "World shares were mostly lower on Thursday ahead of the Bank of England’s policy decision and after US market's pause stretched into a second day and as Chinese stocks rose after China reported better-than-expected trade figures for April. China reported that its exports rose 1.5% in April from a year earlier, while imports jumped 8.4% (beating expectations for a rise of 4.8%). The renewed growth suggests a stronger recovery in demand than earlier data had suggested."
Equity MFs slip
Indian equity mutual fund inflows fell 16.42 per cent to Rs 18,917.08 crore during April on a fresh slump in investments into large-cap funds, according to the data released by the Association of Mutual Funds of India (AMFI), on May 9. For the first time ever, monthly investments via systematic investment plans (SIPs) topped the Rs 20,000 crore landmark to reach a total of Rs 20,371 crore during April. As per AMFI data, SIP book was at Rs 19,271 crore in March.
International stock markets
World shares were mostly lower on Thursday ahead of the Bank of England’s policy decision and after US market’s pause stretched into a second day and as Chinese stocks rose after China reported better-than-expected trade figures for April. China reported that its exports rose 1.5% in April from a year earlier, while imports jumped 8.4% (beating expectations for a rise of 4.8%). The renewed growth suggests a stronger recovery in demand than earlier data had suggested.
