Sensex crashes over 1,000 points. What's making D-Street bulls nervous?

Stock market crash: The Sensex was down 1,018.81 points to 84,553.04 at 11:50 am and the Nifty50 tanked 290.20 points to trade at 25,888.75.

In Short

• Sensex crashes over 1,000 points; Nifty50 falls nearly 300 points
• Market capitalization of BSE-listed companies drops by Rs 3 lakh crore
• Falling IT and financial stocks drive down Sensex and Nifty

Benchmark stock market indices experienced a sharp decline after a weak start to Monday’s trading session. The S&P BSE Sensex plummeted by over 1,000 points, while the Nifty50 fell nearly 300 points during intraday trading.

The Sensex was down 1,018.81 points to 84,553.04 at 11:50 am and the Nifty50 tanked 290.20 points to trade at 25,888.75.

The downturn resulted in a market capitalisation loss of nearly Rs 3 lakh crore for all BSE-listed companies, as volatility surged amid profit-booking activities.

Key factors behind stock market decline

The primary contributors to the decline in both the Sensex and Nifty were falling information technology and financial stocks, alongside heavyweight Reliance Industries Limited. Reliance Industries, ICICI Bank, HDFC Bank, and Axis Bank collectively contributed to the biggest decline in Sensex.

Other significant contributors to this downturn included Bharti Airtel, Mahindra & Mahindra (M&M), State Bank of India (SBI), Tata Consultancy Services (TCS), Infosys, and Tata Motors.

On the sectoral front, indices such as Nifty Bank, Auto, Financial Services, IT, Media, Realty, Healthcare, and Oil & Gas saw declines of up to 1.6%. On the other hand, Nifty Metal rose by 1.5%, continuing its winning streak following China's announcement of measures aimed at boosting its slowing economy.

Meanwhile, the fear gauge, India VIX, surged by 7%. This broad-based sell-off reflects growing concerns among investors regarding market valuations and potential profit-booking activities.

FII activity, oil price, US economic data

Market experts also noted that foreign Institutional Investors (FIIs) are increasingly shifting their focus to Chinese markets, driven by a significant surge in the Hang Seng index, which rose approximately 18% in September. This uptick is attributed to renewed optimism regarding the Chinese economy, following monetary and fiscal stimulus measures announced by Chinese authorities.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that this trend may lead to a consolidation phase in the Indian market. Geopolitical tensions, particularly escalating Israeli strikes across Lebanon, have added uncertainty to global markets.

While oil prices have remained relatively stable due to potential supply increases, the ongoing Middle East conflict has raised concerns about energy supplies. Brent crude futures increased by 0.71%, and US West Texas Intermediate rose by 0.63%, further affecting market sentiment and putting pressure on the Indian equity market, which is heavily reliant on oil imports.

Investors are also feeling nervous ahead of key US economic data and Federal Reserve Chair Jerome Powell's speech this week. Market participants are closely monitoring signals regarding monetary policy direction, with key data points like job openings and private hiring numbers set to be released.

The week will culminate with the US payrolls report, which could influence whether the Federal Reserve opts for a significant interest rate cut in November.

On September 27, FIIs turned net sellers, offloading equities worth Rs 1,209 crore. Despite this selling activity, their total inflows for September exceeded Rs 57,000 crore.

Vijayakumar suggested that while FIIs may continue to sell in India and redirect funds to better-performing markets, this selling is unlikely to significantly impact the Indian market due to substantial domestic liquidity.