Walking on eggshells

The Indian stock market suffered a severe downturn last week, primarily driven by relentless selling from foreign institutional investors (FIIs) and escalating geopolitical tensions😰. This resulted in the benchmark indices, Nifty and Sensex, plunging over 4%, marking their worst decline since June 2022.

So, bear attack, is it?

Market analysts attributed the prevailing nervousness to the highly volatile🌏global markets, suggesting that the sell-off might continue. The India Volatility Index (VIX) extended its previous day's gains, surging by 7.27%, indicating heightened investor anxiety🐻.

Sweet and Sour Chinese Stimulus

Driven by strong stimulus measures from Beijing, China and Hong Kong experienced a significant market capitalisation surge📈. China's market cap rose by $2 trillion, reaching $10.1 trillion, while Hong Kong's reached $6 trillion.  Various measures, including interest rate cuts✂️ and increased fiscal spending, fueled this growth. Consequently, the CSI300 index saw its best performance since 2014, rising 21%, and the Shanghai Composite experienced its highest increase since 2015 at 17%.

While this rally signals a potential recovery for the struggling Chinese economy, increased demand for commodities and crude oil🛢️could push global prices, impacting importing economies like India, potentially widening trade deficits and fueling inflation. Further, the undervaluation of Chinese equities compared to others, like India's, might attract foreign funds. 

Sombre mood for Auto Sales

The Indian automotive🚗market showed a mixed trend during September 2024. Two-wheeler🛵sales experienced robust growth, driven by strong performance in electric two-wheelers and exports. Leading two-wheeler manufacturers like Bajaj Auto, TVS Motor Company, Honda, and Hero MotoCorp all reported positive growth in September 2024 compared to last year📆. Bajaj Auto achieved a significant milestone by surpassing 400,000 units in monthly sales for the first time. In the electric two-wheeler segment, Bajaj Auto overtook TVS Motor to secure the second position in sales.

In contrast, passenger vehicle sales declined for the third consecutive month due to low demand. Major passenger vehicle manufacturers like Maruti Suzuki, Hyundai, and Tata Motors faced declining sales figures📉, with companies reducing dispatches to manage excess inventory. Mahindra & Mahindra, Toyota, and Kia were among the few manufacturers to report positive growth.

SEBI tightens F&O rules

The Securities and Exchange Board of India (SEBI) introduced new regulations for index derivatives, effective November 20, 2024, to mitigate risks and curb market volatility. These changes include increasing the minimum contract value for index Futures & Options to ₹15 lakhs, removing margin benefits for calendar spreads on expiry days, and restricting weekly expiry contracts to a single benchmark index💰.

Additionally, a 2% Extreme Loss Margin will be imposed on short options positions on expiry days, and position limits will be monitored intraday🔎. While SEBI believes these measures will enhance market stability, investors and traders have raised concerns about the potential challenges of meeting the increased margin requirements😟.

The trajectory of the Indian stock market will be influenced by several key factors, including the outcome of the Iran-Israel conflict, the RBI’s MPC meeting, and the domestic corporate earnings season for the second quarter. Additionally, the movement of crude oil prices⛽will also play a significant role in determining the market's direction.

Source: MoneyControl, LiveMint, IndiaToday

To stay updated on actionable insights, visit 👉🏻 https://bit.ly/3SVUWys

Disclaimer – This content is for educational purpose only. https://sam-co.in/6j