On Monday, October 7, the Indian stock market experienced notable volatility, with the benchmark Sensex dropping nearly 1,000 points from the day’s high amid widespread declines. The Sensex opened at 81,926.99 against the previous close of 81,688.45 and rose nearly 450 points to 82,137.77. However, the index erased all gains and fell 998 points from the intraday high level to reach the lower level of 81,139.62. At around 11:30 a.m., the index was trading 70 points lower at 81,618.
Nifty 50 opened at 25,084.10 against the previous close of 25,014.60 and intraday high and low were 25,143 and 24,798.65 respectively. Volatility index India VIX rose more than 6% during trading.
What’s dragging down the Indian stock market?
The Sensex and Nifty 50 remained in the red for six consecutive sessions, dropping nearly 5%. The market decline is mainly driven by heavy selling by foreign portfolio investors (FPIs).
Also Read | FPIs make U-turn in October, sell Rs 27,142 crore from Indian equities. Here’s the reason
According to NSDL data, FPIs sold Indian stocks worth Rs 27,142 crore in the first three days of October alone. Much of this capital is being directed to China following recent measures to support China’s economy and financial markets. This shift is driven by attractive valuations in the Chinese market compared to premium valuations in the Indian market.
The Chinese market has had some perplexing rallies in recent years. Last week, the Shanghai Composite Index rose 21% and the Hang Seng Index rose more than 15%.
“Big sale of FPIs is the main reason for the market decline. FPIs have sold over 40,000 rupees in the last four days. Hang Seng Index has risen 32% in a month. Huge amount of money moved from India to China This is abnormal. This is a ‘sell India, buy China’ situation and it remains to be seen how long that will last,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.
Also read | Japan India Hang Seng ETF attracts attention: Will Chinese stimulus boost SIP returns?
Apart from selling in FPIs, geopolitical tensions and exit poll results of Haryana and J&K elections also contributed to the market weakness.
“Markets are trading under pressure as investor sentiment deteriorates following the exit poll results of Haryana and J&K elections, which show that the Bharatiya Janata Party is lagging behind other countries. Also, geopolitical tensions in the Middle East continue and the constant sell-off in FPIs is keeping investors ‘on their toes,”’ said Manish Chowdhury, head of research at StoxBox.
Anshul Jain, head of research at Lakshmishree Investments and Securities, also said that the direct reason for the drop in Dalal Street could be due to the double hit predicted by the exit polls in Haryana and Jammu and Kashmir. He pointed out that there is a gender. However, tensions in the Middle East caused by the Israel-Iran war and China’s moves are still dragging down global markets, including the Indian stock market.
Also read | Market considers possibility of U.S. “failure to land”
The road ahead
Experts remain positive about the market’s medium- to long-term outlook due to sustained growth in the Indian economy and significant inflow of domestic investors.
Experts expect a short-term rebound as the market appears oversold.
Chaudhry said the market has corrected sharply over the past week and should reverse in the near term.
“Whether the reversal is sustained will depend on the outcome of this week’s central bank policy meeting and future corporate earnings,” Chaudhry said.
Sumeet Bagadia, Executive Director, Choice Broking, said the Sensex has a significant following of 81,000 people.
“If the 30-stock index falls below this threshold, we can expect further sharp selling in the near future. Similarly, the Nifty 50 index has a strong base of 24,750. “The immediate support for the Nifty Bank index is at 51,000 and the key support is at 50,250,” Bagadia said.
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