Stock market crash: Sensex drops 1,400 points, here's how much investors lost

Stock market crash: Concerns mounted amid a volatile market environment driven by uncertainties surrounding the upcoming US presidential election and the Federal Reserve's potential interest rate decisions.

Domestic investors were in for a shock on Monday as stock markets declined sharply due to a mix of factors, especially persistent selling by foreign investors. The BSE Sensex dropped 1,433.61 points, to 78,290.51 at 11:15 am, resulting in a total market capitalisation loss of over Rs 8 lakh crore.

The Nifty50 also fell sharply, down 458.45 points to 23,845.90 and most of the other broader market indices also tumbled sharply, leading to a bloodbath on Dalal Street.

Major contributors to the decline included Reliance Industries, Infosys, ICICI Bank, HDFC Bank, and Sun Pharma, collectively accounting for a 420-point drop on the Sensex. Other significant laggards included L&T, Axis Bank, TCS, and Tata Motors.

Sectoral indices for Nifty Bank, Auto, Financial Services, IT, Pharma, Metal, Realty, Consumer Durables, and Oil & Gas experienced declines ranging from 0.5% to 1.7%. Meanwhile, the India VIX, a gauge of market volatility, surged 5.2% to 16.73.

WHAT TRIGGERED TODAY STOCK MARKET CRASH?

Concerns mounted amid a volatile market environment driven by uncertainties surrounding the upcoming US presidential election and the Federal Reserve's potential interest rate decisions. With major stocks across sectors taking a hit, investors are left grappling with the implications of this sharp market downturn.

US election outcome: The uncertainty surrounding the US presidential election set for November 5 has cast a shadow over investor sentiment in India. With Democratic Vice President Kamala Harris and Republican former President Donald Trump locked in a tight race, the potential economic implications have investors on edge.

Analysts caution that the election outcome could lead to differing policy approaches affecting the Indian economy. A win for Kamala Harris may prompt a more accommodative stance from the US Federal Reserve, potentially enabling the Reserve Bank of India (RBI) to ease domestic rates, which would favor non-banking financial companies (NBFCs).

On the other hand, a victory for Donald Trump could keep US interest rates elevated, leading to a continued high-rate environment in India and favouring public sector banks (PSBs) instead.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “In the next couple of days, global markets will be focused on the US presidential elections, which may result in near-term volatility. However, this is likely to be short-lived, with economic fundamentals such as US growth, inflation, and Fed actions influencing market trends.”

The upcoming US Federal Reserve policy meeting on November 7 is amplifying apprehension in Indian markets. Analysts anticipate a potential quarter-percentage-point rate reduction that could enhance foreign investment inflows to India. Until clarity on the Fed's stance emerges, investors are expected to remain cautious, further contributing to the current market downturn.

Disappointing Q2 earnings: Investor sentiment has also been adversely affected by disappointing Q2 earnings from Indian corporates, leading to a downturn in the equity market and prompting foreign institutional investors (FIIs) to offload Indian stocks.

Vijayakumar said, “The Indian market is grappling with headwinds from decelerating earnings growth. Nifty EPS growth, as indicated by Q2 results, may dip below 10% in FY25, making current valuations difficult to sustain. FIIs may continue to sell in this challenging earnings growth environment, restricting any market rallies.”

Rising oil prices: Oil prices surged by more than $1 during early trading on Monday, following OPEC+’s announcement of a delay in a planned December output hike due to soft demand and increasing supply from outside the group.

Brent futures rose by $1.18 per barrel (1.61%) to $74.28, while U.S. West Texas Intermediate (WTI) crude climbed by $1.20 per barrel (1.73%) to $70.69.