Indian Stock Markets Tumble Amidst Multiple Concerns

Indian Stock Markets Tumble Amidst Multiple Concerns Image/Print

VoM News Desk | October 24, 2023 | 09:55 AM IST | Breaking News | Follow on Google News

Indian Stock Markets Tumble Amidst Multiple Concerns

Indian Stock Markets Tumble Amidst Multiple Concerns

Indian stock markets witnessed a dramatic plunge driven by a confluence of factors, sending shockwaves across the financial landscape. Investors were jolted by the ripple effects of soaring US bond yields, the intensifying Israel-Hamas conflict, and the looming threat of higher crude oil prices. The market turmoil was further exacerbated by a massive selloff of small- and mid-cap stocks, which had previously outperformed their larger counterparts.

Nifty and Sensex Under Pressure, Wealth Eroded

The Nifty and Sensex, India’s benchmark indices, both took a substantial hit, each dropping by more than one percent, breaching key support levels. Even more concerning was the steep decline in the Nifty Midcap 150 and Nifty Smallcap 250 indices, which plummeted by 2.7% and 3.79% respectively. These losses translated into a staggering ₹7.47 trillion reduction in overall investor wealth, with the total market capitalization falling to ₹308.99 trillion on Monday.

Market experts attribute this drastic downturn to the selling pressure from high net-worth individuals (HNIs) and retail investors. Small-cap and mid-cap stocks, which had surged in the past, were hit hardest, significantly underperforming the benchmark Nifty and Sensex. The Nifty and Sensex corrected by 4.6% and 4.9% from their mid-September peaks, but Monday’s sharp decline pushed the Nifty Midcap 150 down by 6.8% and the Nifty Smallcap 250 by 5.24% from their respective record highs.

The Nifty’s drop of 260.90 points to 19,281.75 marked the most significant single-day loss in eight months, while the Sensex plummeted by 825.74 points, the most substantial loss in three months. This sell-off intensified during the final half-hour of trading, coinciding with the alarming news of US bond yields surging to levels not seen in 17 years, breaching 5%.

US Bond Yield Surge & Implications for Indian Markets

The surge in US bond yields triggered foreign portfolio investors (FPIs) to repatriate funds from Indian shares into the safety of the US dollar. This correction came as a stark contrast to record highs just a month ago, driven by the US Federal Reserve’s actions to raise the benchmark Fed Funds Rate from near-zero to 5.25% as a measure to control inflation. The 10-year US treasury yield rose from 4.24% a year ago to as much as 5% on Monday, reducing the appeal of Indian equities for foreign investors.

The compression of the spread between the earnings yield and bond yields has resulted in FPI outflows. Despite robust early earnings in the September quarter, this has led to short-term volatility. However, experts like A. Balasubramanian, CEO of Aditya Birla SunLife Asset Management Co., remain optimistic about the mid- to long-term prospects of the Indian markets.

Other concerns loom over the markets, particularly the Israel-Hamas conflict’s widening scope, which could impact crude oil prices. Brent crude has risen almost 8% since the conflict began, reaching $95.04 per barrel, with the potential to breach the $100 mark if the situation escalates.

As Nilesh Shah, Group President and Managing Director of Kotak Mahindra Asset Management, aptly puts it, there’s a barrage of bad news, and remaining cautious while adhering to asset allocation discipline is essential. Crude oil’s ascent to triple digits, rising geopolitical tensions, FPI outflows, and surging US bond yields have created near-term uncertainties in the market. Small- and micro-cap stocks, which had seen substantial fund inflows, are particularly susceptible to these challenges.

Top mid-cap losers included Supreme Industries, Bank of India, and Laurus Labs, falling by 8.3-10%. Among small-cap stocks, SJVN, BEML, and Rashtriya Chemicals and Fertilizers Ltd witnessed the steepest declines, with losses ranging from 9% to 12%. Given the ongoing turbulence, small caps and mid caps could continue to underperform, posing a persistent challenge for investors.

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VoM News Desk

VoM News is an online web portal in jammu Kashmir offers regional, National & global news.