5 Crucial Reasons Behind the Continuous Fall of the Indian Stock Market

The Indian stock market continues to remain under the sell-off heat for the fifth straight session on Thursday. The Nifty 50 index opened lower in the early morning session and touched an intraday low of 22,184, logging more than 450 points in the last five sessions. The BSE Sensex opened lower and hit an intraday low of 72,891, recording over 1700 points loss in five days. The Nifty Bank index has been under selling pressure for the last seven straight sessions, losing 1600 points.

Reasons for the Drag:
According to the astute observations of our esteemed stock market experts, several factors have been contributing to the downward trend in the Indian stock market. These include the ongoing Lok Sabha elections, FIIs' selling, bounce back in the US dollar rates, hawkish US Fed fueling treasury yields, unimpressive Q4 results 2024 season, and rising India VIX Index.

Saurabh Jain, Vice President of Research at SMC Global Securities, said:
"There are combinations of reasons that are dragging Indian indices together. Ongoing Lok Sabha polls, continuous selling by FIIs, not so impressive Q4 results season, hawkish US Fed, and rising VIX India Index can be attributed as one of the major reasons weighing on the Indian stock market these days."

Why Share Market is Falling ? Top 5 Reasons

1. Lok Sabha Elections:
   The Indian stock market appears to have already factored in the victory of the BJP-led NDA in the ongoing Lok Sabha polls. As a result, the Indian stocks are now in an overbought condition, leading to premature profit booking on Dalal Street. However, the selling pressure is more visible in frontline large-cap stocks, with some bottom fishing observed in the broad market, particularly in the small-cap and mid-cap indices.

2. FIIs' Selling:
   Foreign Institutional Investors (FIIs) have been heavy sellers this month, remaining net sellers in all sessions in May 2024. The cash segment saw FIIs selling Indian shares worth ₹15,863 crore, while the Future & Option (F&O) segment witnessed sales worth ₹5,292 crore.

3. Hawkish US Fed:
   Recent hawkish statements by some US Federal Reserve officials have added pressure to the Indian stock market. These statements, coupled with profit booking earlier this month, have led to a rebound in the US dollar rate, subsequently fueling US Treasury yields. Investors are anticipated to shift their funds from equities and other assets to currency and treasury markets.

4. Non-Impressive Q4 Results 2024:
   The current Q4 results for the 2024 season failed to deliver any surprises, resulting in a lack of additional buying interest on Dalal Street. With the market already factoring in these results prior to the quarterly earnings season, investors are opting to book profits as the season draws to a close.

5. Rising VIX Index:
   The continuous surge in the volatility index (VIX) has created uncertainty among potential buyers, deterring them from investing in the current volatile market. With a historical trend of increasing during Lok Sabha elections, the India VIX Index is expected to rise further as the country approaches the announcement of poll results

In conclusion, the Indian stock market is experiencing a downward trend due to a combination of domestic and international factors. While the ongoing Lok Sabha elections, FIIs' selling activities, hawkish US Fed statements, unimpressive Q4 results, and rising VIX Index are contributing to the market's decline, investors are advised to remain cautious and evaluate their investment strategies in light of these developments.