The Indian stock market faced significant pressure on November 13, 2024, as the Sensex and Nifty experienced their fifth consecutive day of losses. The BSE Sensex plunged by 984.23 points, or 1.25%, to close at 77,690.95, while the Nifty 50 lost 324.4 points, or 1.36%, settling at 23,559.05. This downward trend was primarily driven by foreign institutional investors (FII) selling, growing concerns over higher inflation, and profit-booking by investors at elevated levels.
Factors Impacting Sensex and Nifty Decline
The Sensex and Nifty 50 indices saw a sharp decline amid ongoing FII selling, with foreign investors offloading Rs 2,502.58 crore worth of equities on Wednesday. This continued selling pressure has worsened market sentiment, reflecting investor caution due to high valuations and macroeconomic uncertainty.
While domestic institutional investors (DIIs) purchased Rs 6,145.24 crore worth of equities, they couldn’t fully offset the selling by FIIs. As a result, both Sensex and Nifty have slipped to their five-month lows, marking a challenging period for investors.
Sectoral Performance and Market Sentiment
The broad market witnessed widespread profit booking at higher levels. Among the worst-performing sectors were real estate and financials, with the realty index falling more than 2.25%, and Nifty Bank dropping 2.09%. The auto sector also saw significant losses, with Nifty Auto declining by 2.17%. In addition, mid-cap and small-cap stocks faced substantial selling, with the BSE Midcap index losing 2.56% and the BSE Smallcap index dropping 3.08%.
The ongoing market correction can be attributed to a mix of factors, including inflation concerns and cautious sentiment due to the global economic outlook.
Inflation Surge and Its Impact on Market Sentiment
One of the key drivers behind the market volatility is the recent surge in domestic inflation. The Consumer Price Index (CPI) shot up to a 14-month high of 6.21% in October, surpassing September’s 5.5%. This inflation spike has dampened expectations of a rate cut by the Reserve Bank of India (RBI), further pushing down market sentiment.
Vikram Kasat, Head of Advisory at PL Capital – Prabhudas Lilladher, pointed out that the persistent FII selling, combined with weak corporate earnings and concerns over rising inflation, have shaken investor confidence. This trend is exacerbated by the expectation that inflation may continue to rise in the near future, impacting the outlook for India’s economic growth.
Global Economic Concerns Affecting Indian Markets
The pressure on Indian markets is not isolated. Global economic uncertainty is a significant factor, with rising U.S. bond yields and a strengthening U.S. dollar weighing on investor sentiment. These global factors have contributed to an increasingly volatile market environment in emerging economies, including India.
Vinod Nair, Head of Research at Geojit Financial Services, explained that concerns over potential U.S. trade policies and the global inflationary environment have compounded investor jitters, reflecting in the weakened performance of global stock markets.
Continued FII Outflows Contributing to Market Decline
Since the beginning of October, foreign institutional investors have sold a staggering Rs 1.15 lakh crore of Indian equities, as reported by the National Securities Depository Ltd (NSDL). This extended outflow of capital has only added to the downward pressure on the Indian stock market, leading to declining stock prices across major indices.
I guess it’s more about the profit booking and inflation concerns.