MUMBAI: Benchmark stock market indices experienced their steepest decline in over a month on Monday, as investors adopted a cautious stance ahead of the upcoming US presidential election and anticipated key economic decisions from global central banks.
The uncertainty surrounding the US election, combined with pressures on Indian benchmarks, led to a surge in market volatility, reaching its highest level in three months.
The NSE Nifty 50 plummeted by 321.20 points to close at 23,983.15, while the BSE Sensex fell by 941.88 points, settling at 78,782.24. Most broader market indices also registered significant declines during the session.
All in Red
Notably, all 13 major sectoral indices finished in the red, with small-cap and mid-cap indices, which are more closely linked to domestic sentiment, dropping by 2 per cent and 1.3 per cent, respectively.
The Nifty volatility index soared to 16.69, its highest level since early August, highlighting the market’s apprehension.
Among the major decliners in the Nifty 50 were Hero MotoCorp, Bajaj Auto, Adani Ports, Grasim, BPCL, and Reliance Industries. Bajaj Auto and Hero MotoCorp recorded losses of 3.6 per cent and 4.3 per cent, respectively, following weaker-than-expected domestic sales figures and a decline in market share flagged by CLSA.
Indian markets seem to be struggling to keep pace with global counterparts due to high valuations. The ongoing sell-off has been exacerbated by weak Q2 earnings, dampening investor sentiment.
Continued volatility is expected in the short term as attention shifts to the US presidential election and upcoming central bank policy decisions.
Foreign fund outflow
Persistent foreign fund outflows have further fueled investor caution, contributing to the significant corrections observed in recent sessions. In October alone, foreign investors withdrew a record Rs 1.14 lakh crore from Indian markets. This wave of outflows has intensified concerns regarding stretched valuations, with many investors opting to lock in profits amid ongoing uncertainty.
Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, noted, “Markets experienced a broader sell-off as investors turned risk-averse ahead of the US election and the Federal Reserve’s policy decision in the coming days.” He added, “Stretched valuation concerns have been weighing on sentiment for some time, while ongoing foreign fund outflows and underwhelming corporate earnings have contributed to the uncertainty.”
