Nifty Below 23,900; 10 Reasons That Led To Aggressive Selling Today

The Indian benchmark indices including Nifty and Sensex traded in red on November 4. While Nifty slipped below 23,900, Sensex is down by 1.13%. The lackluster performance was led by aggressive selling witnessed in frontline shares as well mid and the smallcap stocks.

The market capitalisation of BSE-listed firms wiped out nearly Rs 7,37,744.54 crore to touch at Rs 4,40,72,863.01 crore, which equals to USD 5.24 trillion.

At 11:30 am, while Sensex was down 1329.34 points at 78,394.78, Nifty was down at 23,862.20.

Here’s a list of reasons that explains today’s market crash

US Presidential Election

The investors remain cautious ahead of the uncertainty surrounded by the US Presidential elections. Analysts report a near-term volatility pertaining to the outcome of the elections.

Fed’s monetary policy meeting

The meeting by the United States Federal Reserve’s monetary policy will be held between November 6-7. Investors remain cautious ahead of the Federal Open Market Committee (FOMC) meeting as it could set tone for the upcoming market scenarios.

Eye on China stimulus

Investors will keep a close watch on the Chinese leader’s meeting that will take place November 4 to November 8. China is expected to roll out a stimulus package that aims at uplifting the domestic economy.

Weak Q2 earnings

The performance of the fast-moving consumer goods (FMCG) sector dipped in the September quarter. Industry leaders reported of weak demand in rural as well as urban markets. Investor sentiment has remained largely weak in the current times due to slowdown in earnings, analysys said. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, "Nifty EPS growth as indicated by Q2 results may dip below 10% in FY25 which will render the present valuations of about 24 times estimated FY25 earnings, difficult to sustain."

Profit-booking by investors

Due to the cautious stance painted by poor market sentiments, investors preferred to book profits in today’s trading session. This move largely kept the markets in red. Palka Arora Chopra, Director at Master Capital Services, told Reuters “Investors are adopting a 'sell on any rise' approach, with markets likely to be influenced by the upcoming U.S. presidential election on Tuesday and rate decisions from multiple global central banks, including the Federal Reserve, later in the week.”

Decline in auto stocks

Bajaj Auto was down by 5% on account of poor October sales. Maruti Suzuki and Hyundai Motor India slipped by 1.82% and 1.44%.

Volatility in Bitcoin

Bitcoin was up by 12% on account of speculation driven by Donald Trump’s second presidential term in the US. Investors have funneled their funds into Bitcoin-tracking assets, thereby expecting a Republican government.

Fall in OMC stocks

Following Goldman Sachs’ bearish outlook in the sector, shares of oil marketing companies (OMCs) fell by about 5% in November. The brokerage has also given a ‘sell’ rating on Indian Oil Corp (IOC). Notably, IOC’s net profit dropped by 99% in Q2.

FII Selling

Recent downfall in the market can be attributed to high FII selling. Ruchit Jain, Lead Researcher at 5Paisa.com, said "their 'Long Short Ratio' at the start of the series indicates 78 percent positions on the short side. This seems to be the prime reason why we are still seeing a continuation of the price wise corrective phase." V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services added, "FIIs may continue to sell in this difficult earnings growth environment, constraining any rally in the market. Remaining invested in fairly valued largecaps is the safe option for investors in this tough situation."

Spike in India Vix

India VIX surged over eight percent to 17.19.

Coming Week’s Outlook

Technical analyst Anand James, Chief Market Strategist at Geojit Financial Services said "while we expect these levels to be challenged this week, broader trend now requires multiple days of close above 25,100 in order to fully abandon the sell-on-rallies approach that continues to be the dominant theme. Alternatively, inability to float above 24,470 or a direct fall back below 24,150, will expose 23,900-23,300."

Narinder Wadhwa, Managing Director of SKI Capital, however, noted "while certain emerging markets may face challenges, India could see significant opportunities with a Trump presidency due to both strong bilateral relations and a shared liberal, pro-business outlook."

Notably, October was marked as the worst-ever month in terms of outflows as foreign investors withdrew Rs 94,000 crore from the Indian stock market. This move was mainly driven by elevated valuation of domestic equities and attractive valuations of Chinese stocks.