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The Indian stock market suffered significant losses on Thursday, 22 October, with the Sensex and the Nifty 50 dropping over half a per cent each.
The Sensex declined 460 points, or 0.62%, to end at 73,249.39, while the Nifty 50 dropped 124 points, or 0.54%, to end at 22,687.65.
The selloff was widespread and even deeper in the mid- and small-cap pockets, as the BSE 150 Midcap and 250 Smallcap indices crashed 0.79% and 0.92%, respectively.
Equity benchmarks have been down for three consecutive sessions now. In these three sessions, the 30-share pack has declined nearly 1,500 points, or 2%, while the Nifty has crashed nearly 460 points, or 2%.
Investors lost almost ₹15 lakh crore in just three sessions, as the overall market capitalisation of the BSE-listed firms dropped to over ₹458 lakh crore from nearly ₹473 lakh crore on 16 October.
Let's take a look at three key factors behind the fall in the stock market:
Brent crude now trades above $110 per barrel, fuelling concerns over its impact on the overall Indian economy and corporate profitability.
Escalating tensions in West Asia are driving oil prices higher. According to Reuters, attacks by Yemen's Iran-aligned Houthis in Saudi Arabia prompted the United States to order some diplomats and family members to leave its missions in the Kingdom.
"Strong external headwinds in the form of elevated crude prices and high US bond yields are emboldening bears to build short positions in the market. This is the reason why the market is declining even on days of positive institutional FII and DII buying, like yesterday," said V K Vijayakumar, Chief Investment Strategist, Geojit Investments.
To some extent, caution ahead of next week's US Federal Reserve interest rate decision following the October 27-28 policy meeting is also weighing on sentiment, as a surprise rate hike could exacerbate foreign capital outflows from Indian stocks, which have crossed the ₹3 lakh crore mark this year.
Even though the market sees a low chance of a rate hike this time, a significant majority of experts see another rate hike in December.
As per Reuters, the CME's FedWatch Tool shows traders see a 16% chance of a rate hike next week, but are discounting a 90% likelihood of an increase in December.
Since oil prices have been up for most of the year, inflation has risen globally, prompting central banks to tighten their monetary policies. The US Fed, Bank of Japan, and the Reserve Bank of India are among the central banks that raised interest rates in their latest policy meetings.
As per provisional figures, the Indian rupee declined 44 paise to close at 94.82 per US dollar.
In the previous session, the Indian rupee strengthened amid by optimism over a potential India-US trade agreement following US President Donald Trump’s comments indicating that a deal could be announced soon.
Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said the rupee traded weak as crude oil prices remained above $110 and weak sentiment in secondary markets weighed on the currency.
“Continued US-Iran tensions and uncertainty across West Asia are keeping crude prices elevated, raising concerns over India’s import bill and adding pressure on the rupee. Going forward, geopolitical developments and crude oil movements will remain key drivers, with the rupee range seen between 94.45 and 95.25,” said Trivedi.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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