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Five reasons the Indian stock market is falling for the fifth time

stock market
18 Jun 20246 mins readBy MOFSL

Introduction

The benchmark indices of the Indian stock market opened mildly red on May 9, 2024. This marks a noticeable fall in numbers for the fifth straight session. Oil & gas and construction companies were the leading losers, while automobile companies gained the most.

There has been a selling pressure on the Nifty Bank index for the last seven sessions, with a fall of 1900 points. Experts believe the reasons for the fall are the ongoing Lok Sabha elections, unimpressive 2024 Q4 results, rising VIX Index, Foreign Institutional Investors (FII) selling, hawkish US Fed fueling treasury yields, and reviving dollar rates. 

This post teaches you more about the reasons responsible for pulling the Indian stock market downward. 

Top 5 reasons for the stock market fall

 

1. Lok Sabha elections

Political uncertainty often unsettles investors, increasing the sale of holdings. Policy changes, geopolitical tensions, and elections also contribute to market volatility. 

The Indian stock market has disregarded that the BJP-led NDA will win. As a result, there is overbuying in stocks, and premature profit booking is on the rise on Dalal Street. 

Nevertheless, there is an uptrend in the sale of frontline large-cap stocks. The small-cap and mid-cap indices also outshined the frontline indices, leading to bottom fishing in the broad market. 

2. Hawkish US Fed

Many times, the Indian stock market is impacted by economic instability or negative news from global markets. Few US Fed officials have given hawkish talks, pressurising the Indian stocks. While investors booked profits early this month, the statements of the US Fed officials have made the US dollar rates bounce back. The dollar’s revival has also fueled the US Treasury yield. As a result, investors are likely to switch money to currency and treasury markets instead of equity and other assets. 

3. FIIs’ exiting

FIIs have withdrawn their positions in large volumes this month. They have been the net sellers in all May 2024 sessions. In the cash segment, the sale of shares by FIIs was worth Rs. 15,863 crore till May 9, 2024. In the Future & Option (F&O) segment, the sale was worth Rs. 5,292 crore.  

4. Rising VIX Index

The VIX Index has been rising continuously. This has made fresh buyers doubtful, who are not interested in putting more money in the volatile market. The trend of the VIX Index rising is seen every time during the Lok Sabha elections. As the election process is ongoing, the market is expected to gain more volatility, with the poll results date nearing.

5. Non-impressive Q4 results 2024

When reputed companies report weaker-than-expected earnings or indicate mediocre outlooks, it impacts investor confidence negatively and triggers a sell-off in the stock market. 

The current Q4 results for the 2024 season aren’t impressive. This poor performance by companies is another reason restricting investors from buying more on Dalal Street. The market had discounted the results before their announcement, causing investors to book profits before the end of the season. 

Why did the stock market crash in 2023?

In 2023, as well, the stock market was volatile. The cause of this disruption was a mix of global and domestic factors. Some reasons wreaking havoc in the first half of the year include escalating US yields, the Adani-Hidenburg conflict, and foreign investor flight. During the second half, the market revived a bit due to IT gains and the win of the BJP in the elections. 

Summing up

The Indian stock market is witnessing a crash for the fifth season because of several reasons. These include the ongoing Lok Sabha elections, investment actions taken by FIIs, increasing VIX Index, poor 2024 Q4 results, etc. You must navigate through this challenging period with immense caution. You must buy stocks during this dip if you have a risk appetite and can maintain a long-term horizon. 

 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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