Stock market crash: After a positive start, Indian markets declined for the 6th straight session on Thursday, November 14 on the back of weak global trends, a rise in the dollar index, a weakening rupee and continuous foreign investor selling. The Sensex fell 266 points or 0.34 per cent to the day's low of 77,424.81 while the broader Nifty lost 116.25 points or 0.5 per cent to its intra-day low of 23,486.10.
Both benchmarks are over 10 per cent away from their respective record highs, hit in September. Just in these six sessions alone, the indices have lost over 4 per cent.
In the previous session, November 13 Sensex settled 984.23 points lower at 77,690.95 while the broader Nifty ended 324.4 points lower at 23,559.05
Broader markets, however, outperformed the benchmarks with the Nifty Midcap and Nifty Smallcap indices gaining 0.55 percent and 0.85 percent, respectively.
"The Trump factor has triggered many profound changes in markets already. The dollar index is strong and rising and is currently at 106.61. The US 10-year bond yield is at 4.48%. These two are strong headwinds for equity markets in emerging economies like India. The positive factor is the huge liquidity at the disposal of the DIIs and the sustained flows into these funds. Domestically, the worry is the disappointing Q2 results and the consensus earnings downgrade," explained V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
How long can these flows sustain? How early can we expect a rebound in earnings growth and strong GDP indications? These are relevant questions for which we will have to wait for answers. Meanwhile investors will have to stay with quality stocks in sectors with strong demand. Investors should be cautious in investing in sectors like cement, metals and petroleum refining which are facing a growth slowdown, said Vijayakumar. Safety is in sectors like banking, new-age digital companies, hotels, pharma and IT where growth prospects are good, he advised.
In the Sensex pack, only 10 stocks were in the green while the remaining 20 traded in the red. Kotak Bank, JSW Steel, M&M, Tech Mahindra, and Reliance Industries were the top gainers while HUL, ITC, Adani Ports, IndusInd Bank, and Titan led the losses.
Sectoral indices were mixed in trade today with Nifty Media rising the most, 1.5 percent followed by Nifty Realty, up 0.86 percent. Nifty Auto, Nifty Metal, Nifty Pharma were also in the green, gaining 0.67 percent, 0.3 percent and 0.1 percent, respectively. Meanwhile, Nifty FMCG was the top declining sector, down 0.67 percent followed by Nifty Oil and gas which fell 0.5 percent. Nifty Bank, Nifty Fin Services, Nifty IT were also in the red.
Here are four reasons behind the stock market crash:
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
Dollar Surges: The dollar index surged by 1.8% in November, following the impact of Donald Trump’s victory in the U.S. election. It reached 105.98, the highest level since July, exerting pressure on emerging market currencies. The rise in the dollar index and the sharp spike in US 10-year bond yields to 4.42% are a cause of concern as high yields in U.S. bonds are likely to drive further outflows from emerging markets to the U.S.
Continued FPI Selling: Foreign Portfolio Investors (FPIs) continued their selling spree for the 32nd consecutive session, offloading shares worth ₹364.35 crore on Tuesday, bringing total outflows for November to ₹23,911 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.
Concerns Over Delay in Rate Cuts: While central banks globally, including the US Federal Reserve, have begun reducing interest rates, the Reserve Bank of India (RBI) has kept rates unchanged. Inflation remains a key concern, with rising food prices due to the extended monsoon and crop damage. The rupee's depreciation further exacerbates the situation, increasing import costs and potentially driving inflation higher. October’s inflation data, released on Tuesday, showed a 6.21% rise in retail inflation, breaching the RBI’s upper tolerance limit of 6% for the first time in over a year.
Weak Q2 Earnings: In a recent GREED & fear report, Christopher Wood of Jefferies highlighted that the July-September quarter results from Indian corporates led to the most significant earnings downgrades since early 2020. Jefferies noted that it reduced its FY25 earnings projections for 63 percent of the 121 companies it tracks that have recently posted quarterly earnings. These downgrades point to challenges linked to a cyclical economic slowdown. Despite these short-term obstacles, Jefferies expressed cautious optimism, maintaining a long-term positive stance on India's equity market.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
