Why is market falling today? Sensex drops 600 points, Nifty below 22,600. Key factors behind Rs 5 lakh crore rout

The Indian stock market extended sharp losses on Thursday, with Sensex and Nifty dropping nearly 1% each as investors braced for expiry-day volatility.

Sensex dropped over 600 points to fall below 73,100 and Nifty 50 lost 224 points to fall below 22,600 on Thursday morning. The drop wiped off nearly Rs 5 lakh crore from the total market capitalisation of all companies listed on BSE, dragging it down to Rs 457 lakh crore.

Power Grid shares dropped around 3% to lead losses on Sensex, while Tata Steel, Maruti Suzuki, BEL, Asian Paints, M&M, Adani Ports, Bajaj Finserv, Trent, Sun Pharma, NTPC, UltraTech Cement, Bajaj Finance, HUL,. IndiGo, ITC, HDFC Bank, Reliance Industries and Titan fell 1-2% each. Bucking the trend, Eternal shares gained nearly 1%.


Broader markets plunged deeper into the red, with Nifty Smallcap 100 and Nifty Midcap 100 indices falling nearly 2% each. This came as India VIX, which measures volatility in the market, jumped nearly 6% to 16.60.

Among the sectors, Nifty Auto, Nifty FMCG, Nifty Metal and Nifty Pharma plunged around 2% each. All sectoral indices are currently in the red. The overall market breadth continued to remain negative, with NSE seeing 510 advances and 2,348 declines, while 99 stocks remained unchanged.

Here are the key factors pushing the market down today.

1) Oil prices jump

Oil prices rose around 2% to near $111 per barrel mark again on Thursday as a drone strike on a Saudi Aramco oilfield triggered concerns that the escalating conflict in West Asia could disrupt supplies. Brent crude futures jumped more than $2 to trade at around $110.7 per barrel. WTI Crude futures also gained more than a dollar to trade at around $99 per barrel.

The latest escalation also prompted the United States to order some diplomats and their family members to leave its missions in Saudi Arabia. Iranian Foreign Minister Abbas Araqchi told the Financial Times on Wednesday that Tehran was fully prepared to defend itself. President Masoud Pezeshkian also told state media that the United States could not expect dialogue while continuing to blockade and threaten Iran. The escalating tensions are triggering worries of further supply disruptions in oil shipments.

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2) Weak global cues

Dalal Street is accompanying its global peers in the selloff today. China’s stock market has entered the infamous bear market, after falling more than 20% from its June peak. South Korea’s Kospi and Hong Kong’s Hang Seng plunged around 3% each.

Japan’s Nikkei dropped over 2%. While the American stock market closed in the green yesterday, Wall Street futures are currently in the red, suggesting bearish start later today.

3) Persistent FII selling

Foreign investors remained net buyers of Indian equities on Wednesday, net purchasing shares worth a little over Rs 1,022 crore. However, this is negligible compared to the massive selloff seen this month so far.

FIIs have remained net sellers of Indian equities in 10 out of 13 sessions in October so far. Overall, the selloff intensified since last month, following a brief trend reversal.

What lies ahead for Dalal Street?

The recent market trend has been the outperformance of large-caps relative to mid-and small-caps, said V K Vijayakumar, Chief Investment Strategist, Geojit Investments. He noted that the broader market resilience in recent months has been more a function of liquidity than earnings. Latest September AMFI data also reveals this trend of increasing preference for mid-and small-caps over large-caps. This has created a paradox of over-valued mid-and small-caps, particularly the latter, coexisting with attractively valued large-caps, he said, adding that this paradox cannot continue for long and will get corrected. “It appears that this is happening now. This trend is likely to sustain.”

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“Strong external headwinds in the form of elevated crude prices and high US bond yields are emboldening bears to build short positions in the market. This is the reason why the market is declining even on days of positive institutional- FII and DII- buying, like yesterday. Sectoral churns towards fairly-valued large-caps is the ideal investment strategy now. It may take time, but this strategy will certainly be rewarded,” according to Vijayakumar.

Technical view on Nifty

Nifty’s swiftness of yesterday’s drop and the attack on the downside marker of 22,700 warns us of larger breakdowns, said Anand James, Chief Market Strategist at Geojit Investments.

Recovery hopes rest on the ability of Nifty being at 22,590 to stay intact, but will require a push back above 22840 to confirm upside strength, the analyst said.

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.