Sensex, Nifty 50 crack nearly 1% each; why is Indian stock market shaking?-Explained

On Tuesday, May 7, after opening higher, Indian stock market benchmarks, the Sensex and the Nifty 50 soon fell almost a per cent each on an all-round selloff. 

The selloff was deeper in the midcap and smallcap segments. The BSE Midcap index cracked over 2 per cent while the BSE Smallcap index fell nearly 2 per cent during the session.

The India VIX jumped nearly 6 per cent to 17.6 level. 

Around 12:15 pm, the Sensex was 0.63 per cent down at 73,434 while the Nifty 50 was 0.70 per cent down at 22,285.

What’s causing the tremors in the Indian stock market?

Experts believe there are two main reasons behind the volatility in the Indian stock market.

FIIs selling

According to experts, the biggest reason behind the recent volatility in the Indian stock market is the strong selloff by foreign institutional investors (FIIs).

In just three trading sessions in May, FIIs have sold off Indian equities worth ₹982 crore, according to NSDL data.

“FIIs have been continuously selling, which has caused nervousness among domestic retail investors,” said G. Chokkalingam, Founder and Head of Research at Equinomics Research Private Limited.

“Generally FIIs don’t buy before general elections. They wait for the election outcome even if they have to pay a premium. I have observed this over the last two decades,” Chokkalingam said.

2. Pre-election jitters

Another factor could be related to the ongoing general election. Even though the market has fairly discounted the return of NDA to power, the low turnout in the elections so far seems to have instilled some degree of cautiousness among retail investors.

“Perhaps the more significant factor might be the apprehensions emanating from the unexpectedly low turnout in the elections so far,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“One view is that the definite and smooth victory of the ruling dispensation is a bit uncertain now. The market, which has already discounted a BJP/NDA victory, is a bit unsure now. Perhaps this can be the reason for the apprehension in the market and the bulls shedding their aggressive stance,” said Vijayakumar.

(More to come)

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 07 May 2024, 12:25 PM IST