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Stock Market Crash, Nifty crash: Indian benchmark indices —BSE Sensex and NSE Nifty50—bled on Thursday, October 3, 2024 due to escalating tensions between Israel and Iran.
The BSE Sensex fell as much as 1,264.2 points, or 1.50 per cent, reaching an intraday low of 83,002.09. Similarly, the Nifty 50 dropped 345.3 points, or 1.33%, hitting an intraday low of 25,451.60.
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Of 30 Sensex stocks, only JSW Steel and Tata Steel remained in the green, while M&M, Asian Paints, and Tata Motors were the most affected ones.
Broader markets also faced declines, with the Nifty MidCap index down 1.13 per cent and the Nifty SmallCap index down 1.28 per cent.
All the sectors were also trading in the negative territory, with Nifty Realty down 1.87 per cent and Nifty Auto down 1.76 per cent.
Top reasons behind the Sensex, Nifty drop:
Escalating Israel-Iran conflict
The ongoing tensions in the Middle East are a primary factor affecting market performance. Reports indicate that at least six individuals were killed and seven injured in an Israeli strike on a health centre in Beirut.
Israeli Prime Minister Benjamin Netanyahu vowed to retaliate against Iran following the latter’s firing of approximately 200 ballistic missiles at Israel.
The situation escalated further when Iranian missile attacks targeted Tel Aviv, and Israel confirmed the deaths of eight soldiers during operations in southern Lebanon.
That said, UN Secretary-General Antonio Guterres described the situation as marked by “escalation after escalation.”
Foreign Institutional Investors (FIIs) on a selling spree
In the first nine months of the year (2024), Foreign Institutional Investors (FIIs) have sold Indian equities in five of those months. This trend reflects a cautious sentiment towards the Indian market amidst global uncertainties as FIIs shift to Chinese stocks due to cheaper valuations.
In January, FIIs offloaded shares worth Rs 35,977.81 crore, followed by further sales of Rs 15,962.72 crore in February. March saw a brief respite, with purchases amounting to Rs 3,314.47 crore, but this was short-lived as they sold Rs 35,692.19 crore in April and Rs 42,214.28 crore in May.
The pattern continued with a modest purchase of Rs 2,037.47 crore in June and another buying spree of Rs 5,407.83 crore in July. However, August marked another major sell-off, with FIIs offloading shares worth Rs 21,368.51 crore, followed by a rebound in September when they bought shares worth Rs 15,423.32 crore.
Notably, on October 1, FIIs continued their selling trend, offloading shares worth Rs 5,579.35 crore. This indicates ongoing caution among investors regarding market conditions.
Analysts suggest that FIIs might continue to sell, with capital flowing into bullish Chinese stocks and the relatively undervalued Hong Kong market. According to V K Vijayakumar, chief investment strategist at Geojit Financial Services, this trend may persist given the high valuations in India.
Sebi tightens F&O rules
The Securities and Exchange Board of India (SEBI) has rolled out a six-step plan designed to reduce retail participation in speculative index derivatives, which could result in a potential 30-40 per cent decline in trading volumes. These measures aim to curb excessive speculation in the futures and options (F&O) segment, where daily turnover frequently exceeds Rs 500 trillion, often leaving retail investors at a disadvantage.
Key changes include increasing the contract size from Rs 5 lakh to Rs 15 lakh, which raises margin requirements and mandates the upfront collection of option premiums from buyers.
Technical indicators
Anand James, chief market strategist at Geojit Financial Services, indicated that while there were expectations for a pullback earlier in the week, the failure of Nifty to close above 25,970 could signal a deeper correction, with potential declines targeting the 25,600-24,600 range.
As geopolitical tensions rise and market sentiment deteriorates, investors remain cautious, leading to major volatility in the Indian stock market.
First Published: Oct 03 2024 | 10:04 AM IST
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