The Indian stock markets took a significant hit on the first trading day after Diwali, with both the BSE Sensex and NSE Nifty plunging nearly 2%—leading to an estimated ₹10 lakh crore in investor losses. Here’s a breakdown of the key factors driving today’s sell-off:
- Heavy Foreign Institutional Investor (FII) Selling: FIIs have been aggressively offloading Indian equities. In October alone, FIIs withdrew a record ₹94,017 crore from Indian markets, continuing this trend into November. Concerns over the global economic outlook, particularly regarding the U.S. presidential elections and potential stimulus measures from China, are encouraging FIIs to diversify funds away from India.
- Weak Domestic Earnings: Indian companies have reported lackluster quarterly results, with sectors like oil & gas, metals, and chemicals showing considerable earnings slowdowns. This weak earnings growth, with notable underperformance from heavyweights such as Reliance Industries, Tata Motors, and NTPC, has made current high valuations difficult to justify. The EPS growth forecast for Nifty has now dropped below 10%, which, at current valuation levels, makes the market more susceptible to corrections.
- Geopolitical and Economic Uncertainty: Investors are jittery as global markets brace for the outcome of the U.S. presidential election and potential impacts on international trade policies. Additionally, rising crude oil prices, partly driven by ongoing Middle East tensions, are affecting sentiment, given India’s reliance on oil imports.
- Profit Booking Ahead of Major U.S. Events: With the U.S. Federal Reserve’s monetary policy announcement due on November 7, traders are opting to lock in profits to safeguard against anticipated volatility. Coupled with poor U.S. job market data last week, this has compounded global economic concerns, putting additional pressure on the Indian market.
These combined global and domestic factors have led to widespread selling across sectors, with all major indices in the red. Analysts suggest that while some support levels may stabilize the indices temporarily, the current climate of high valuations and weak earnings growth could maintain pressure on Indian markets in the near term.
