On October 7, 2024, the Indian stock market faced considerable turbulence, with the benchmark Sensex witnessing a drop of over 1,000 points from its intraday high. This article explores the key factors contributing to the market's decline.
Significant Volatility in the Indian Stock Market
The Indian stock market experienced a rollercoaster ride on Monday, with the Sensex plunging dramatically. It opened at 81,926.99, surged to an intraday high of 82,137.77, before plummeting to a low of 81,109.86. The Nifty 50 mirrored this volatility, peaking at 25,143 before dropping to 24,798.65. The India VIX, a measure of market volatility, surged by over 6%, highlighting heightened uncertainty among investors.
1. Increase in Foreign Institutional Investor (FII) Selling
Recent data from the National Securities Depository Limited (NSDL) reveals that foreign portfolio investors (FPIs) have sold Indian equities worth ₹30,719 crore in the first four trading sessions of October. This trend indicates a significant shift in investor sentiment, with capital increasingly moving towards China due to its favorable market conditions and economic support measures. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remarked, “The massive FPI selling is the primary factor behind the market’s fall.”
2. SEBI Guidelines Add Pressure
The Securities and Exchange Board of India (SEBI) recently introduced new regulations aimed at tightening equity derivatives trading. These changes include a reduction in the number of weekly options contracts and a significant increase in the minimum trading amount. Such measures, while intended to enhance market stability, have raised entry barriers for investors, contributing to market apprehension.
3. Downgrades from BCA Research
BCA Research has downgraded India’s market rating from ‘Neutral’ to ‘Underperform’, predicting a meaningful decline in Indian stock prices over the next six to nine months. The report highlights expectations of slowing profits and contractions in profit margins, recommending a strategic shift towards investing in Chinese stocks while shorting Indian equities.
4. Rising Crude Oil Prices
Crude oil prices have surged amidst concerns over potential supply disruptions from the Middle East. Brent crude futures recently traded at $77.73 per barrel. This increase poses significant challenges for oil-importing nations like India, further straining the economy and elevating concerns among investors regarding inflation and economic stability.
5. Technical Levels for Nifty and Bank Nifty
Technical analysts are observing critical support and resistance levels for Nifty and Bank Nifty. Rupak De from LKP Securities notes that Nifty is facing a bear attack, with a significant support level at 24,750. In contrast, the Bank Nifty is seeing major support around 51,000, with a risk-reward setup that remains favorable for buying on dips.
Conclusion
The Indian stock market's recent decline can be attributed to various factors, including FII selling, new SEBI regulations, downgrades from financial research firms, rising crude oil prices, and technical market pressures. As investors navigate this volatile landscape, it remains essential to stay informed and strategically position portfolios to mitigate risks.