The Indian stock market experienced significant volatility on Monday, October 7, with the benchmark Sensex falling 1,088 points from its intraday high amid broad-based selling. The Sensex opened at 81,926.99 against its previous close of 81,688.45 and rose nearly 450 points to 82,137.77. However, the index erased all gains and closed down 638 points or 0.78 percent at 81,050.
The Nifty 50 opened at 25,084.10 against its previous close of 25,014.60 and touched its intraday high and low of 25,143 and 24,694.35 respectively. The Nifty 50 closed down 219 points, or 0.87 percent, at 24,795.75. Volatility index India VIX rose more than 6 percent.
What is the weight on the Indian stock market?
The Sensex and Nifty 50 have been in the red for six consecutive sessions, each falling more than 5 percent. The market decline was largely due to significant selling by foreign portfolio investors (FPIs).
According to NSDL data, FPIs sold Indian equities worth ₹27,142 crore in the first three days of October. Much of this capital is being sent to China following the country's recent moves to support its economy and financial markets. The shift is driven by attractive valuations in the Chinese market compared to premium valuations in the Indian market.
Chinese markets have seen a streak of volatility in the past few sessions. In the past week, the Shanghai Composite Index has jumped 21 percent, and the Hang Seng Index has jumped more than 15 percent.
"The main factor behind the market decline is massive selling by FPIs. FPIs have sold ₹40,000 crore in the last four days. The Hang Seng index has risen 32 per cent in a month. Big money is moving from India to China," said VK Vijayakumar, chief investment strategist at Geojit Financial Services. This is extraordinary.
"Markets are trading under pressure as investor sentiment dampened following Haryana and J&K election exit poll results, which showed the BJP lagging behind its peers. Also, ongoing geopolitical tensions in the Middle East and continued selling by FPIs are deterring investors. said Manish Chaudhary, head of research at StocksBox.
Anshul Jain, head of research at Laxmishree Investments and Securities, also pointed out that the immediate cause of weakness on Dalal Street could be attributed to the double whammy predicted by the assembly exit polls for Haryana and Jammu and Kashmir. However, Middle Eastern tensions due to the Israel-Iran war and the rise of China are still dragging down global markets, including the Indian stock market.
The way forward
Experts remain positive about the medium to long-term prospects of the market due to the continued growth of the Indian economy and significant inflow of domestic investors.
In the near term, experts expect a bounce back as the market appears oversold.
According to Chaudhary, the markets have recovered sharply in the last week and should see a reversal in the short term.
"The percentage of reversal will depend on the outcome of RBI's policy meeting this week and corporate earnings," Chowdhury said.
According to Srikant Chauhan, Head of Equity Research, Kotak Securities, the domestic market slipped below the 50-day SMA (Simple Moving Average) after a long period. It has also formed a bearish candlestick on the daily chart and a lower top on the intraday chart, which is mostly negative.
"Key market structures remain weak, but due to temporary oversold conditions, we may see non-directional activity in the near term. Now for day traders, 24,700/80,700 and 24,650/80,500 will be key support zones, while 25,000/81,800 and 500-day SMA, or 25,050/82,000, short-term traders should be cautious and very selective as there is a risk of getting stuck at lower levels,” said Chauhan.
Markets are trading under pressure as investor sentiment dampened following Haryana and J&K election exit poll results, which showed the BJP
ReplyDelete