Panic grips Dalal Street as markets shed 1%

Panic gripped Dalal Street as benchmark equity indices BSE Sensex and NSE Nifty 50 ended the week’s first trading session in the negative territory, down over 1 per cent each.

BSE Sensex shed as much as 941.88 points or 1.18 per cent to settle at 78,782.24. Similarly, NSE Nifty50 ended lower by 309 points or 1.27 per cent to settle at 23,995.35. Meanwhile, the INDIA VIX rose by 5.01 per cent, settling at 16.70, indicating heightened market volatility.

During the trading hours, Nifty50 plunged to an intraday low of 23,816.15, falling over 2 per cent or 488.2 points from the previous close. Mirroring the Nifty50, the BSE Sensex slumped to 78,232.6, down 1,491.52 points or 1.87 per cent. Reasons behind the fall:

Muted Q2 earnings

According to Vinit Sambre, Head (Equities), DSP Mutual Fund, the markets have recently corrected by around 9-10 per cent, with certain sectors like PSUs, engineering and auto experiencing even sharper declines. The market had been on a strong upward trajectory, fueled by continuous earnings growth, but results for the September quarter had fallen short of expectations, leading to earnings downgrades. This disappointing performance is primarily due to reduced government spending and slow consumption growth.

Consumption dipping

According to experts, urban consumption, which had previously remained resilient, is now also showing signs of slowing —adding to the pressure, especially as lower- to middle-income households have already been under stress. Heavy rains have been partly blamed for the slowdown, making it crucial to monitor the pace of recovery. If growth fails to pick up, it could pose further risks to both earnings and market performance.

FIIs on selling spree

Foreign Institutional Investors (FIIs) have recently recorded the highest monthly outflows, which domestic investors are currently absorbing. Experts are of the view that markets may experience some additional weakness in the near term, but anticipate a potential recovery after the Maharashtra election and with the onset of the festive season, which could boost consumption. Populist policies in some states due to upcoming state elections may also provide a lift to spending.

Uncertainties over US polls

The next two quarters will be key in setting the direction for the markets, with added volatility from the US election expected to ease soon. With the US voting to elect its next president on Tuesday, November 5, markets around the world are feeling the effects of a close race between former president and Republican candidate Donald Trump and incumbent Vice President and the Democratic contender, Kamala Harris.