Reason behind Indian market fall! 📉
The Indian stock market benchmark Nifty 50 index dropped 10 per cent from its all-time high, driven by heavy foreign selling, disappointing earnings, and geopolitical tensions.
Disclaimer: This post is for educational purposes only. Markets are subject to risk, so please consult your financial advisor before making any investment decisions.
The reasons behind the crash are - A combination of heavy selling by foreign portfolio investors (FPIs) due to stretched market valuations, disappointing Q2 earnings from India Inc., geopolitical tensions, have collectively weighed on the market.
1. FII selling
FPIs have withdrawn over ₹1 lakh crore from the Indian financial market in October alone— a scale of outflow not witnessed even during the COVID-19 crash or the global financial crisis of 2007-2008
Foreign Portfolio Investors (FPIs) continued their selling spree for the 32nd consecutive session, offloading shares worth ₹2,502.30 crore on Wednesday, bringing total outflows for November to ₹27,683.30 crore. October saw a major exodus of ₹1.14 lakh crore worth of Indian stocks, as concerns over extreme valuations, slower-than-expected earnings, and weak economic indicators dampened investor sentiment. Meanwhile, China's recent stimulus measures are attracting foreign investors, shifting their focus from Indian markets to Chinese stocks.
2. Weak Quarterly 2 results
Indian shares have been largely driven by weak September quarter results across key sectors. FMCG companies, hindered by a slowdown in rural consumption, reported earnings below estimates, while banks are dealing with high slippages and deteriorating asset quality, both of which have unsettled investors. Auto companies are also facing slower sales growth, particularly among car makers, with subdued projections for the upcoming festive season further dampening investor sentiment and triggering significant selloffs across the auto sector.
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3. Geopolitical tensions (US elections)
The uncertainty surrounding the U.S. presidential election on November 5 has contributed to a cautious sentiment in the Indian market today. With Democratic Vice President Kamala Harris and Republican former President Donald Trump in a close contest, investors are wary of the potential economic implications. Analysts suggest that the outcome could lead to varying policy approaches affecting the Indian economy. A victory for Harris may prompt a more accommodative stance from the U.S. Federal Reserve, potentially leading the Reserve Bank of India (RBI) to ease domestic rates, which would benefit Non-Banking financial companies (NBFCs).
Conversely, a Trump win could keep U.S. interest rates elevated, prompting the RBI to maintain higher rates and delaying any rate cuts, favouring public sector banks (PSBs) instead. This uncertainty is causing investors to adopt a wait-and-see approach, impacting market performance.
In the next couple of days’ markets globally will be focused on the US presidential elections and there can be near-term volatility in response to the election outcome. However, this is likely to be short-lived and economic fundamentals like US growth, inflation and the Fed action will influence the market trend.
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Rupee weakens:
The rupee depreciated by 1 paisa, reaching a historic low of 84.40 against the US dollar in early trading on Wednesday. Persistent foreign fund outflows and a strong dollar weighed on the local currency. Forex traders observed significant volatility in the USDINR pair, with the rupee edging closer to its all-time low. An SBI research report released earlier this week predicts that the rupee could depreciate by 8-10% against the US dollar amid Donald Trump's return to the White House
The Nifty opened positive, but as the day progress we witness selling pressure from higher levels. On the daily chart, we are observing “Bearish” candlestick formation which indicates still we can see selling pressure from higher level, only Silver line is that prices still above 200 DMA. In the coming trading session if nifty trades above 23950 then it may test 24050 – 24100 levels. On the downside, 23850 – 23800 levels may act as support for the day. Below 23800 we can witness more downside. We still maintain our stance that 23800 on daily closing basis is now a make or break level. As long as nifty holds 23800 on daily closing basis there is high probability that momentum on the upside may continue.
With over 34 years of experience serving our clients, we offer personalised 1-on-1 consultations to help you understand market trends and invest in fundamentally strong stocks. Contact us at 022-61937300 or visit www.sre.co.in for more details. Invest smart with SRE.
Short term:
The Nifty 50 market is currently in a downward trend on a long-term basis. Yet, as indicated in the 4-hour chart, it's been bearish in the last session. Obviously, the market is in an uncertain movement. If the market breaks below the near support at the 23550 level, it could lead to a further decline to 23300 and 23050 levels. However, if the market manages to break above the resistance level of 23810, it could potentially rise to higher levels like 24000 and 24250. The future direction of the market is uncertain at this point and will depend on how it reacts to these key support and resistance levels.
Long term:
The Nifty 50 stock market has been declining for a while, trying to hold onto support levels. However, yesterday's market ended bearish, indicating a downward trend. If the market continues to decline and breaks below 23,550, it could further fall to 23,300 and 23,050.
On the other hand, if the market starts to rise once again and breaks above the near resistance level of 23,810, it could reach higher levels like 24,000 and 24,250, potentially continuing the current channel formation.
With over 34 years of experience serving our clients, we offer personalised 1-on-1 consultations to help you understand market trends and invest in fundamentally strong stocks. Contact us at 022-61937300 or visit www.sre.co.in for more details. Invest smart with SRE.