SENSEX, NIFTY Crash: Nearly ₹9 lakh crore of investors’ money wiped out as benchmark indices drop up to 2%

Indian stock markets traded under pressure on Monday, November 4, amid heavy selloff across sectors. A meltdown in the broader markets wiped out nearly ₹9 lakh crore of investors' money as the total market capitalisation of BSE-listed firms declined to nearly ₹439 lakh crore from ₹448 lakh crore in the previous session.

The SENSEX opened lower at 79,713.14, and selling intensified to hit the intraday low of 78,232, leading to a fall of nearly 1500 points. In the closing session, SENSEX trimmed some losses to close 941 points lower at 78,782. Similarly, NIFTY50 also witnessed a fall of 500 points to hit an intraday low of 23,816 and later trimmed losses to close 1.2% lower at 23,995 on Monday.

The benchmark indices were dragged by multiples factors such as uncertainty over the outcome of the US elections, a muted Q2FY25 earnings season, foreign outflows and a rise in oil prices.

However experts believe this could be a temporary correction phase as the benchmark indices have shown resilience in the last one year. NIFTY has gained 24.78% in the last one year while rising 10.42% so far this year (YTD). On the other hand, SENSEX has gained 22.4% YTD and more than 9% in the last one year.

Here’s a look at key factors behind the Monday’s market meltdown:

Outcome of the US election

The investors remained cautious ahead of the US Presidential elections scheduled on November 5. Various polls indicate a close race between former President and Republican candidate Donald Trump and his rival Democrat leader Kamala Harris. Experts suggest that this has led to a rise in uncertainty regarding the outcome of the elections. This uncertainty led to increased caution among investors on account of a possible near-term volatility in response to the outcome of the polls.

Continued selling by FIIs

Foreign Institutional Investors (FIIs) sold ₹1,13,858 crore worth of equities in the month of October, marking the highest ever outflows from Indian markets in a month. Experts believe that the current high valuations turned FIIs net sellers in October, amid other reasons such as China emerging as an alternative market after the recent announcement of a stimulus package. On the other hand, Domestic Institutional Investors (DIIs) seem to be cautious due to macroeconomic factors and mixed Q2 results.

Fed policy outcome

The US Federal Reserve meeting, scheduled on November 7, also affected the markets. The US CPI came in higher than anticipated than the previous two readings, which led to rumours of re-calibration of rate cut cycle by the Fed. Experts anticipate a 25-basis-point rate cut in US lending rates, which could further impact the markets and investor sentiment.

Muted Q2 numbers

The September quarter earnings by major companies have been weaker than expected. This has in turn impacted investor sentiment negatively and raised uncertainties regarding the outlook of the markets.

According to reports, 34 of the NIFTY constituents reported a sales growth of 5% and EBITDA growth of 1% and no increase in profit-after-tax in their Q2 results, as of October 31.

Among these 34 companies, 10 surpassed the PAT estimates and nine missed the estimates, according to an MOFSL research report. On the Ebitda front, eight companies exceeded while seven missed estimates for the quarter.

Weak rupee and rising oil prices

The Indian rupee was close to its all-time low of ₹84.1 against the US dollar in Friday's trade. Experts believe that a weaker currency may trigger further foreign outflows, increasing pressure on Indian markets. The price of Brent crude oil futures rose 2% to $74 a barrel after the Organization of the Petroleum Exporting Countries Plus (OPEC+) postponed its December production increase by a month, following the escalation of the ongoing geopolitical conflict in the Middle East. Experts also believe Iran-Israel hostility can also impact crude oil prices going ahead.