Sensex crashes 1,300 points: What's causing the market mayhem today?
The Indian stock market witnessed a major crash on Monday with the Sensex and Nifty indices plummeting by over 1.6% each. The BSE mid-and small-cap segments also witnessed a fall of up to 2%. At the time of writing, Nifty was down 1.8% or 441 points, at 23,862 while Sensex was in the red by 1.65% or 1,316 points at 78,407.
Sectoral indices and investor impact
The downturn impacted several sectoral indices with Nifty Oil & Gas, Media, Consumer Durables and Realty indices plunging 2-3%. Other sectors including Nifty Bank, Auto, FMCG, Metal, FMCG and PSU Bank also witnessed a decline of over 1% each. The market slump led to investors losing more than ₹6 lakh crore in a single session.
US election and market volatility
The upcoming US election has left the market uncertain. "In the next couple of days, markets globally will be focused on the US presidential elections, and there can be near-term volatility in response to the election outcome," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said. He added that this volatility would be short-lived as economic fundamentals like US growth, inflation, and Fed action would dictate future market trends.
Market valuations and the Fed factor
Despite the recent correction, the discomfort with current valuations remains. Pankaj Pandey, Head of Research at ICICI Securities, said, "The recent correction has not significantly changed the rich multiples of the overall market." He also pointed out that the expectation of a 25-basis-point rate cut by the US Federal Reserve may not have a major impact on the market as it is likely already priced in.
Q2 results and technical factors
The weaker than expected Q2 results from Indian companies have also raised investor concerns. Pandey said, "Earnings have been a bit soft, largely driven by commodities, which is impacting the overall market sentiment at this point in time." Technical factors related to negative momentum in the stock market have also contributed to the downturn. Anand James, Chief Market Strategist at Geojit Financial Services, said attempts to break this negative momentum have been unsuccessful due to lack of fresh triggers.
