- Election uncertainties and unimpressive earnings reports led to a significant drop in the stock markets on Thursday, with benchmark indices experiencing their largest decline in over three months.
- The Nifty fell by 1.55% to 21,957.5, marking its biggest single-day fall since 17 January, while the Sensex dropped by 1.45% or 1,062 points to 72,404.17, its worst performance since 23 January.
- Foreign portfolio investors (FPIs) sold a provisional ₹6,994.86 crore worth of shares, contributing to the market’s decline.
Stock markets tumble amid election uncertainties and disappointing earnings, with the Nifty and Sensex experiencing significant declines. This article explores the factors behind the fall and the potential implications for investors.
Market Correction Underway
There are indications that the market correction may continue, with large bearish bets on the Nifty and Bank Nifty futures contracts suggesting that the decline could extend until the end of the month. The India Vix, a measure of market volatility, closed at a 20-month high of 18.2, reflecting the heightened nervousness among investors.
Impact on Broader Markets
The broader markets were hit even harder, with the Nifty Smallcap 250 falling 2.65% to 15,006.35 and the Nifty Midcap 150 tumbling 1.74% to 18,245.35. Despite domestic institutional investors purchasing a provisional ₹5,642.53 crore, selling by retail and high-net-worth investors added to the downward pressure. This resulted in a net sell-off of shares worth ₹118.10 crore on BSE, while data for the National Stock Exchange (NSE) was not available. The total wealth of investors was reduced by ₹7.28 trillion.
Analysts’ Take on the Market Decline
Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies, attributes the pullback to uncertainty about the incumbent’s victory margin in the upcoming elections and in-line results amid high valuations across many market segments. Other analysts, however, anticipate limited downside for the Nifty, which has already pulled back 3.7% from its record high of 22,794.7 on 3 May.
Investment Strategies Amid Market Correction
Gaurang Shah, Senior Vice-President at Geojit Financial Securities, advises short- to medium-term investors to book profits, while long-term investors should view the correction as a buying opportunity. He remains bullish on power, defence, banks, non-banking financial companies (NBFCs), and autos. HDFC Bank, L&T, Reliance Industries, ITC, and Asian Paints were among the top contributors to the Nifty’s fall.
Conclusion
Thursday’s market decline can be attributed to a combination of factors, including election uncertainties, a mediocre earnings season, overhang on key sectors like IT and financials, and sustained FII outflows. The market’s trajectory in the coming weeks will likely be influenced by the election outcome and the performance of key sectors. Despite the current volatility, some analysts see potential investment opportunities in the correction.
