Indian stock market investors lost over Rs 9 lakh crore in a strong wave of selloffs on Tuesday, October 22. The benchmark indices BSE Sensex and NSE Nifty 50 were down by over a per cent each.
The overall market cap of the companies listed on the BSE fell to around Rs 444.7 lakh crore from around Rs 453.7 lakh crore in the previous sessions
Indian stock market investors lost over Rs 9 lakh crore in a strong wave of selloffs on Tuesday, October 22. The benchmark indices BSE Sensex and NSE Nifty 50 were down by over a per cent each.
The mid and smallcap segments of the markets suffered even sharper declines as the BSE Midcap and Smallcap indices fell up to 4 per cent.
The overall market cap of the companies listed on the BSE fell to around Rs 444.7 lakh crore from around Rs 453.7 lakh crore in the previous sessions.
On the sectoral front, PSU Banks and Realty dragged the markets, falling 4.2 per cent and 3.3 per cent, respectively. Auto, Media, Consumer Durables and Oil & Gas sectors each settled over 2 per cent down.
According to market analysts, rising geopolitical tensions, uncertainty surrounding the US Presidential elections 2024, and a sustained selloff by foreign portfolio investors (FPIs) are the key factors weighing on market sentiment.
In addition, muted Q2 earnings and the stretched valuations in the Indian stock markets also dented the investor sentiment.
“Nifty has now corrected by around 7 per cent from its record high, reaching the critical moving average support at the 100 DEMA i.e. 24,485 level. The outlook suggests further downside, particularly in the midcap and smallcap spaces. On the index front, the next major support is around 24,000, with potential resistance between 24,700 and 25,000 in case of a rebound. We recommend adjusting trades accordingly and advise against adding to losing positions,” said Ajit Mishra – SVP, Research, Religare Broking Ltd.
The escalating Iran-Israel war and tensions in the Middle East have kept the investors on watch. After Iran launched a barrage of missiles toward Israel on October 1, investors are closely monitoring the developments and remain concerned about their potential impact on the domestic economy. There has already been a spike in crude oil prices, and the equity markets have experienced significant fluctuations.
On Tuesday, global oil benchmark Brent crude climbed 0.61 per cent to USD 74.74 per barrel.
The July-September corporate earnings season has failed to impress the investors so far. The benchmark indices witnessed selling pressure after several large-cap stocks reported disappointing Q2 results. Following the results, investors are now adopting a defensive strategy.
FIIs offloaded equities worth Rs 2,261.83 crore on Monday, while Domestic Institutional Investors (DIIs) bought equities worth Rs 3,225.91 crore, according to exchange data.
According to NSDL data, the selling by FPIs has reached Rs 88,244 crores by 21 October. The major cause behind the massive foreign capital outflow is the ‘Sell India, Buy China’ strategy gaining momentum after the Chinese government announced several stimulus to boost its economic growth. Foreign investors are running to the Chinese markets due to a huge valuation gap with respect to the Indian market.
However, this record-high FII sell figure didn’t impact the market severely because of the countervailing action of sustained DII buying.
VK Vijayakumar, chief investment strategist at Geojit Financial Services says when market valuations are at elevated levels some triggers will cause corrections, making the valuations reasonable and in tune with long-term averages.
“The fact is that even after the correction triggered by the sustained FII selling, Indian market valuations are higher than historical averages even though large-cap valuations can be justified by their long-term growth prospects,” Vijayakumar said.
The upcoming US election adds to the uncertainty, with former Republican President Donald Trump and Democratic Vice President Kamala Harris running a tight race to win key competitive states ahead of the November 5 voting day.
“Since market sentiments continue to be negative a sharp and sustained recovery appears difficult even though a rebound can happen at any time. Financials will be relatively resilient in the present market setting," Vijayakumar added.