Analyzing the Factors Behind the Indian Stock Market's Recent Decline

Analyzing the Downward Trend

The Indian stock market has been on a downward trajectory, with the Nifty 50 index dropping to an intraday low of 24,210, shedding 590 points over five sessions. Simultaneously, the BSE Sensex hit a low of 79,477, losing 1,866 points, and the Bank Nifty index fell to 50,559, dropping around 2,060 points during the same period. To understand why the market is experiencing such a decline, it’s essential to examine the underlying factors influencing this trend.

Key Factors Contributing to the Market Decline

1. Disappointing Union Budget 2024

The Union Budget 2024 was anticipated with high hopes, especially from Dalal Street, which expected significant policy measures to drive economic growth. However, the budget turned out to be an extension of the interim budget, offering no substantial announcements to boost corporate sector CAPEX expansion plans. This shortfall has put pressure on companies’ earnings projections for FY25, leading to a sell-off in the Indian stock market.

2. Subpar Q1 2024 Earnings Results

Market analysts have highlighted that the focus has shifted from the Union Budget to corporate earnings growth, which has not met expectations in the first quarter of FY25. According to Siddhartha Khemka, Head of Retail Research at Motilal Oswal, the trajectory of earnings growth has remained marginally below projections, further contributing to the market’s downward movement.

3. Global Market Weakness

Weakness in global markets has also impacted the Indian stock market. Disappointing quarterly results from major US tech companies like Tesla and Alphabet led to significant selling pressure in the US stock market, which subsequently affected other global bourses. Additionally, manufacturing issues in Germany have pressured Asian and European markets, contributing to the negative sentiment in India.

4. Selling Pressure from Institutional Investors

Domestic Institutional Investors (DIIs), who had previously been strong supporters of the Indian market, have recently turned sellers. This trend, combined with continued selling by Foreign Institutional Investors (FIIs), has exacerbated the decline in the stock market.

5. Decreased Demand from Premium Buyers

The first quarter of FY25 has seen a decline in the sales of premium and luxury items, indicating a reduction in the purchasing power of the premium consumer segment. This trend suggests that economic recovery among high-end consumers may be faltering, adding to the market’s woes.

In Conclusion, The recent fall in the Indian stock market can be attributed to a combination of domestic and global factors. The lackluster Union Budget 2024, below-par corporate earnings, weak global market trends, selling pressure from institutional investors, and decreased demand from premium buyers have all played a role in the market’s decline. Investors should consider these factors and seek advice from certified experts before making investment decisions.

Disclaimer: The views expressed in this article are those of individual analysts or broking companies. FinBrook advises investors to consult certified experts before making any investment decisions.