Bears attack! Sensex, Nifty see biggest single-day fall since June 2024 crash

Indian stock markets sharply declined on Thursday as Sensex and Nifty crashed more than 3% each to record the worst-single day fall since the infamous June 2024 market crash, when the benchmark indices tumbled 6% each following the outcome of Lok Sabha elections.

Sensex on Thursday plunged nearly 2,500 points to settle at 74,207, and Nifty 50 tumbled 776 points to close at 23,002, after briefly breaching the key psychological level of 23,000 during the session. The selloff wiped out over Rs 11.5 lakh crore in market capitalisation of BSE-listed firms, bringing the total down to a little over Rs 427 lakh crore. Soaring crude prices and hawkish Fed commentary were among the key triggers behind the decline.

The infamous 2024 election day crash

Today’s sharp decline reminded investors of the massive stock market crash of June 2024. After the voting for 2024 General Elections, exit polls predicted a landslide victory for the National Democratic Alliance (NDA), led by Prime Minister Narendra Modi-led BJP. They predicted that BJP would win more than 272 seats in the 543 member Parliament, while NDA would cumulatively win up to 370 seats. This had pushed markets sharply higher on Monday (June 3, 2024), a day before the mayhem.

As the session began on Tuesday (June 4, 2024), investors quickly panicked as the early trends of the actual election results were far away from the fairytale landslide victory expected. BJP failed to reach the halfway mark on its own, and the NDA won 293 seats to form the government, although with lesser seats than what was expected.

Sensex and Nifty crashed nearly 6% each on June 4, 2024, wiping off a significant portion of investors' wealth. Sensex settled at 72,079, and Nifty 50 closed at 21,884.

While the NDA did indeed win the elections and form the government, the investor sentiment was severely hurt. What followed was a series of political debates and mudslinging. Congress-led opposition coalition, called I.N.D.I.A, accused the PM Modi-led government of stock market scam, as the leaders of BJP had strongly suggested that investors buy Indian shares ahead of the results, expecting a massive victory in the elections.

Markets however moved on, while one day of massive losses seemed to be the end of the world, they only became a short-term trend in hindsight that long-term investors soon recovered. Sensex then went on to rally 19% (around 12,000 points) to cross 86,000 in less than two years.

While today's market crash seems massive, history shows the resilience of Indian stock markets.

All 30 constituents of the BSE Sensex closed in the red on Thursday, with Eternal and HDFC Bank falling more than 5% to lead losses. Bajaj Finance, Mahindra & Mahindra, and Larsen & Toubro followed, declining 4-5%.

“Indian benchmark equity indices plunged over 3% on March 19th, snapping a three-day rally, weighed down by a sharp rise in crude oil prices and weak global cues. Additionally, the US Federal Reserve kept its benchmark rate unchanged while signalling higher inflation, leaving limited room for rate cuts this year. Brent crude has surged to around USD 114, posing a negative for oil-importing countries like India,” said Bajaj Broking.

“Going ahead, markets appear to be in a phase of heightened fragility, where sentiment is being driven by rapidly evolving geopolitical developments and sharp rise in crude prices. Given the intensifying tensions around energy infrastructure in West Asia, we remain cautious on the market in the near term and expect volatility to persist,” said Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services.

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