The Indian stock market fell sharply today, extending its slide for the third straight session. The Sensex dropped 1,433 points to close at 80,981, and the Nifty fell 458 points to end at 23,845. This marked a sharp correction across indices. The severe market turbulence wiped out more than ₹8 lakh crore in investor wealth in a single day.
Important Factors Causing the Crash.
Foreign Institutional Investors Outflows:
FIIs sold equities worth over ₹1.13 lakh crore in October, which is the biggest ever monthly outflow from Indian markets. This trend persisted into November, as fears about valuation and a weaker earnings prospects of companies are driving this.
The FII selling, thus far, has managed to reduce the benchmark indices by nearly 8 percent from recent highs.
Earnings Growth – Weak:
So far, the Q2 FY25 earnings season has been underwhelming with most Nifty50 companies recording no growth in profit.
EBITDA growth for major firms was at a paltry 1%, and net profit growth was next to nothing, much below market expectations.
BPCL, IndusInd Bank, and UltraTech Cement have all witnessed sharp downgrades in their earnings projections, which has added to the negative sentiment.
Global Volatility and U.S. Federal Reserve Meeting:
Uncertainty over the decision of U.S. Fed to cut the interest rate for December has caused volatility in global markets. The prospect of a minimal cut by 25 bps is keeping investors on tenterhooks.
Concerns over the labor market and fears of inflation in the U.S. have been driving uncertainty globally, thereby impacting Indian markets indirectly.
Crude Oil Prices Soar
Crude oil prices climbed 2.1 percent to $74 per barrel, the day when OPEC+ resorted to delay planned output increase. An already high importer of oil, India would witness soaring inflation risks owing to high fuel prices.
Depreciation in Indian rupee:
It again devalued further and moved around all time low of 84.1 against a dollar, affecting foreign investors return apart from making imports costly as the main threat to trade deficit in case of India .
Sector Impact
Banking and Financial Services: HDFC Bank and ICICI Bank suffered significant drops, adding over 420 points to the Sensex downfall.
Technology: IT biggies such as Infosys and TCS too took a hit due to the threat of falling demand across the world.
Oil & Gas: Reliance Industries and the likes suffered because of higher crude prices and deteriorating margins.
Small and Midcaps: The declines were steeper for midcap and smallcap stocks as broader indices suffered. This reflected wide risk aversion.
Economic Data Insights
Market Volatility: The India VIX index, which measures market volatility, which is increased by 5.2% to 16.73, indicating growing nervousness among investors.
GDP Worries: The leisure Corporate earnings and the persisting inflation have raised worries about India’s GDP growth trajectory for FY25.
Analyst Recommendations
Short-term prospects are bleak, but analysts are advising to be optimistic with caution:
Value-driven sectors such as infrastructure, pharmaceuticals, and the FMCG should be in focus and the Large-cap stocks with strong fundamentals should be invested in to reduce volatility of market.
Expect a clearer investment signal from developments like the U.S. Federal Reserve meeting and geopolitical tensions going forward.
The current downturn is a mixture of profit booking, weak domestic fundamentals, and increasing global uncertainty. The Long-term investors must focus on the structural growth story of India but remain vigilant about macroeconomic risks. And for the short-term players, it’s good to avoid taking risks and staying in cash-rich positions.
