Sensex & Nifty: Indian equity markets fell sharply on Thursday, May 9, amid a widespread selling in index heavyweights, coupled with FII outflows, and rising US bond yields.
The benchmark S&P BSE Sensex dropped by as much as 1,132 points to hit an intraday low of 72,334, while the Nifty50 dropped 370 points intraday to hit a low of 21,932.
The BSE benchmark, eventually, ended 1,062 points, or 1.45 per cent, lower at 72,404. The Nifty50, too, settled below the crucial 22,000-mark at 21,958, down 345 points or 1.55 per cent.
In the broader markets, the BSE MidCap index declined 2 per cent, and the BSE SmallCap index erased 2.4 per cent.
“The fall in the market is primarily attributed to the prevailing uncertainty surrounding the general elections. This uncertainty has significantly bolstered India’s volatility gauge, the India VIX, reaching its 52-week high at 19, indicative of market apprehension. Moreover, the muted cues from the Q4 earnings of large-cap companies have further dampened investor sentiment,” said Arvinder Singh Nanda, senior vice president, Master Capital Services.
That said, VK Vijayakumar, chief investment strategist at Geojit Financial Services views this as an opportunity for long-term investors to consider acquiring high-quality large-cap stocks that have been affected by FII selling.
Here are the key reasons for Thursday’s sharp fall:
Broad-based selling by index heavyweights
Index heavyweights including Reliance Industries, L&T, HDFC Bank, ICICI Bank and ITC saw broad-based selling due to political uncertainty. These key players collectively accounted for approximately 80 per cent of the index’s decline, exerting considerable downward pressure on the stock markets.
FIIs and FPIs selling
Foreign Institutional Investors (FIIs) have been actively offloading their holdings throughout May, with total sales worth Rs 15,863.14 crore.
On May 8 alone, FIIs divested equities worth Rs 6,669.10 crore. Concurrently, Foreign Portfolio Investors (FPIs) have divested equities worth Rs 13,747 crore thus far in FY25.
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This trend of aggressive FII selling, coupled with comparatively subdued buying activity from Domestic Institutional Investors (DIIs), analysts believe, has contributed to market volatility.
“During the last one month, the Nifty is down 1.5 per cent, while the Shanghai Composite is up by 2.62 per cent and Hang Seng is up by a whopping 8.8 per cent. Chinese and Hong Kong markets are cheap with PEs around 10 while India is expensive with double the PE of these markets,” said V K Vijayakumar of Geojit Financial Services.
So long as this outperformance of the Chinese and Hong Kong market will continue, FIIs are likely to sell, he added.
Nervousness around General election outcome
Low voter turnout witnessed in the initial three phases of the elections, analysts opine, have exacerbated markets’ nervousness.
Independent analyst Ambareesh Baliga said that markets are discounting less than 400 seats for the ruling BJP, sensing competition from the I.N.D.I.A bloc. “The selling may intensify should the Nifty50 breach the 22,000-mark decisively,” he added.
Technical levels
According to Santosh Meena, head of research, Swastika Investmart, the Nifty has support in the 22,000-21,700 zone.
“An oversold market suggests a potential bounce around this level. However, for a more significant upward move, Nifty needs to break above the 22,500 resistance level,” he added.
