Sensex Plunges 495 Points, Nifty Closes Below 24,800: 5 Key Reasons Behind the Indian Share Market Decline

The Indian share market took a sharp dive today, with both the BSE Sensex and NSE Nifty50 closing in the negative, weighed down by external factors and internal market forces. The markets started the day on a weak note, and as the session progressed, losses deepened, reflecting concerns across different sectors.

At the close of trading, the Sensex was down by 495 points, a 0.6% dip, while the Nifty50 dropped 220 points, closing 0.9% lower. The expiry of Nifty50 contracts, combined with weak global cues, seemed to drive the markets lower.

In the day’s top movers, Infosys, L&T, and SBI emerged as the biggest gainers. On the other hand, shares of Bajaj Auto, Nestle, and M&M were among the top losers. Meanwhile, the GIFT Nifty ended 166 points lower, closing at 24,836.

The broader markets mirrored this negative trend, with the BSE Mid Cap index losing 1.7%, and the BSE Small Cap index dropping 1.4%. Among the sectoral indices, IT and media sectors managed to hold up well, while others, particularly metals, auto, and power sectors, faced heavy selling pressure.

Despite the downturn, there were some bright spots in the market, with companies like Indigo Paints, CAMS, and Tech Mahindra touching their 52-week highs. Now, let’s dive into the key reasons behind the sharp fall in the Indian stock markets today.

Top 5 Reasons Behind the Market Decline:

Auto Index Takes a Hit:

The auto sector led the decline, with Bajaj Auto’s stock dropping 12%. The company cited concerns over weak festive sales due to rising inflation, particularly in food prices, which has impacted consumer spending. This sentiment carried over to other automakers, weighing heavily on the broader market.

FII Selling Pressure:

Foreign Institutional Investors (FIIs) have been pulling out their funds from the Indian markets, diverting them to other regions, particularly China. According to NSE data, FIIs sold Rs 34.4 billion worth of equities on Wednesday, worsening the market sentiment in India.

Weakness in Asian Markets:

The downturn in Indian markets also reflected broader weaknesses in Asian markets. China’s CSI 300, Shanghai, and Hong Kong’s Hang Seng indices were down by over 1% as China’s housing policy briefing failed to lift investor confidence. Similarly, Japan’s Nikkei also posted losses, dragged down by weak trade data for September.

Liquidity Impact from Large IPOs:

The launch of significant IPOs, such as Hyundai Motor India, has been absorbing liquidity from the secondary market. Hyundai’s IPO size of Rs 280 billion has tightened liquidity, contributing to the broader market’s downturn.

Delayed Rate Cut Expectations:

With inflation rising sharply, especially due to increasing food prices, expectations for interest rate cuts have been delayed. India’s retail inflation for September surged to 5.5%, its highest in nine months, further fueling concerns over the economy’s future growth prospects.

Sector-Specific News and Developments:

Nestle’s Share Price Falls by 4%

In the FMCG sector, Nestle India experienced a sharp 4% decline after the company reported a marginal dip in its Q3 profits. Net profit for the September quarter stood at Rs 8.9 billion, a 0.9% drop compared to the same period last year, driven by high commodity prices and sluggish consumer demand for some of its key brands like Maggi and Nescafe.

This performance has weighed on the company’s stock, which has already posted a 13% decline in 2024, compared to the Sensex’s 12% gain during the same period. Additionally, Nestle’s parent company, Nestle SA, has lowered its profit forecast, adding more pressure on the stock.

Nalco Gains 5% Amid Global Aluminium Price Surge

In contrast to the broader market’s performance, shares of Nalco rose by nearly 5% today, helped by strong global aluminium prices and Alcoa Corporation’s solid quarterly earnings. Alcoa reported a YoY revenue growth of 11.6%, bolstered by lower raw material costs and a 45% rise in alumina prices, which further supported Nalco’s stock.

China’s continued aluminium production at record levels has alleviated global supply concerns, while rising demand for aluminium from electric vehicle and solar cell manufacturers has further buoyed the sector.

Commodities and Currency Update:

• The Indian rupee was trading at 84.06 against the US dollar, reflecting slight depreciation as markets absorbed external pressures.

• In the commodities market, gold prices rose 0.2%, trading at Rs 76,789 per 10 grams, while silver prices dipped by 0.6% to Rs 91,660 per kg.

In conclusion, The Indian stock markets experienced a sharp fall today, driven by a combination of external economic factors and internal pressures such as weak auto sales, FII outflows, and broader concerns over inflation and delayed rate cuts. Despite these challenges, there are some sectors, like IT and metals, showing resilience, while specific stocks continue to hit new highs.

Investors should stay cautious in the short term, given the volatile market conditions. However, understanding the broader economic landscape and key developments in specific sectors will be crucial for making informed decisions in the long term.