Indian Stock Market Sees Sharp Decline: Sensex Falls 1,272 Points, Nifty Below 25,850 – Key Reasons Behind the Drop

The Indian stock market faced a sharp decline on September 30, 2024, with both the Sensex and Nifty closing in the red, continuing the downturn from the previous session. After opening on a weak note, the market slipped further as the day progressed, driven by profit booking and global uncertainties.

At the end of the session, the BSE Sensex dropped by 1,272 points, registering a 1.5% loss, while the NSE Nifty shed 357 points, down by 1.4%. Investors were seen booking profits at record high levels, deepening the losses. Despite the broad decline, NTPC, Tata Steel, and Britannia emerged as top gainers, while Trent, Axis Bank, and Reliance were among the worst performers.

GIFT Nifty also mirrored the market sentiment, closing 349 points lower at 26,004. Broader markets witnessed a similar decline with BSE Mid Cap index falling 0.3%, and the BSE Small Cap index remaining flat.

On a sectoral basis, most indices ended in the red, except for metals, which managed to stay positive. Stocks in the banking, auto, realty, and finance sectors were the hardest hit, as they bore the brunt of selling pressure.

Among the notable performers, Hitachi Energy, Britannia, and Colgate reached their 52-week highs, underscoring some resilience in specific sectors. Meanwhile, the rupee weakened, trading at ₹83.79 against the US dollar. In commodity markets, gold prices rose by 0.2% to ₹75,853 per 10 grams, and silver saw a marginal increase to ₹91,504 per kg.

5 Reasons Behind the Market Decline

1. Rising Tensions in the Middle East

Escalating geopolitical tensions in the Middle East, particularly with Israel intensifying strikes on Iranian-backed forces, have raised fears of a broader conflict. The situation worsened after Israel’s killing of Hezbollah leader Sayyed Hassan Nasrallah in Beirut, leading to further attacks on Hezbollah and Houthi forces. Investors are shifting towards safe-haven assets like gold, resulting in a pullback from equities.

2. Chinese Stock Market Outperformance

The outperformance of Chinese markets has diverted foreign investment from Indian equities. Hang Seng index surged by 18% in September, driven by China’s economic stimulus measures. This has made Chinese stocks more attractive, drawing capital away from Indian markets.

3. Mixed Global Cues

Global markets presented mixed signals, with Mainland China’s stocks rising by 4% after a better than expected PMI report. However, Japan’s Nikkei 225 fell by over 5% following the election victory of Shigeru Ishiba in the Liberal Democratic Party, who is expected to become Japan’s next prime minister. These mixed signals have contributed to increased volatility in global markets.

4. Profit Booking

Prior to the recent decline, Indian markets had seen a robust six-day rally, driven by a US interest rate cut that boosted investor sentiment. With no major catalysts to sustain the upward momentum, investors opted to lock in profits at record high levels, leading to a broad sell-off.

5. Caution Ahead of US Economic Data

Investors are wary ahead of key US economic data releases, including job openings, private hiring figures, and ISM manufacturing data. Additionally, Federal Reserve Chair Jerome Powell is set to speak, which could provide insights into future interest rate decisions. The week will culminate with the release of the US nonfarm payroll report and unemployment rate, both of which could have significant implications for global markets.

Sector-Specific News

Aurobindo Pharma Shares Drop After FDA Observations

Shares of Aurobindo Pharma fell 4.5% after the US FDA issued 10 procedural observations for its Telangana manufacturing unit during an inspection. The observations are related to the facility's operations and the company is expected to respond within the stipulated time.

Ola Electric Stock Drops Over 4%

Ola Electric Mobility witnessed a 4% decline, taking its stock below ₹100 for the first time since its listing. The company recently launched its "network partner program" to expand sales in Tier 2 and Tier 3 cities, aiming to onboard 1,000 partners before the festive season. However, Ola Electric’s sales dropped 34% in August, and investors are awaiting September's auto data to assess if this trend persisted.

Bajaj Steel Hits 52-Week High

Bajaj Steel Industries shares hit a fresh 52-week high as the company’s board is set to meet to discuss a bonus issue. The stock has gained 11.9% over the past two days and has delivered a 147.5% return over the past 180 days. The company's market capitalization now stands at ₹14.7 billion, reflecting strong investor confidence.

Outlook for Indian Markets

As the market continues to grapple with global uncertainties, investors should keep a close watch on geopolitical developments and key economic indicators, both domestically and internationally. The Indian stock market may remain volatile in the near term, with sectors like banking, realty, and auto being particularly sensitive to changes in global sentiment.

In the face of such challenges, prudent investing strategies focusing on quality stocks with strong fundamentals could help navigate the current market conditions. Additionally, tracking safe-haven assets like gold may provide opportunities for diversification and risk management during periods of heightened volatility.