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The Indian stock market experienced a significant downturn this week, marking the largest weekly decline since June 2022. The BSE Sensex, a benchmark index for the Bombay Stock Exchange, plummeted by 3,883.4 points, representing a 4.53% drop, to close at 81,688.45. Meanwhile, the Nifty50 index, representing the National Stock Exchange of India, fell by 1,164.35 points, a 4.44% decrease, ending at 25,014.60.
This downturn can be attributed to a confluence of factors, including ongoing geopolitical tensions, weak domestic data, and hawkish statements from Federal Reserve Chair Jerome Powell. The global economic landscape remains uncertain, with heightened concerns regarding inflation, interest rate hikes, and the ongoing war in Ukraine. These factors have negatively impacted investor sentiment, leading to a sell-off in the Indian market.
Domestically, the Indian economy has shown signs of weakness, with recent data indicating slowing growth and rising inflation. This has further dampened investor confidence, as they anticipate a potential slowdown in corporate earnings. Additionally, the Reserve Bank of India (RBI) has also adopted a hawkish stance, raising interest rates to combat inflation. This tightening monetary policy has also put pressure on the stock market.
The impact of the market decline was felt across various sectors. The BSE Mid-cap Index shed 3.2%, with prominent decliners including Mahindra & Mahindra Financial Services, Godrej Industries, and Godrej Properties. The BSE Large-cap Index, on the other hand, experienced a 4.3% decline, with notable losses seen in companies like Dabur India, Adani Green Energy, and Reliance Industries. The BSE Small-cap Index also dipped by 2%.
Foreign institutional investors (FIIs) continued their selling spree, offloading equities worth Rs 40,511.50 crore. In contrast, domestic institutional investors (DIIs) bought equities worth Rs 33,074.39 crore. The net outflow of foreign funds suggests a lack of confidence in the Indian market. However, the buying activity by domestic institutions provides some support to the market.
The market's performance in the coming weeks will depend on several factors, including the resolution of geopolitical tensions, the pace of economic growth in India, and the stance of the RBI on interest rates. Investors will be closely monitoring these developments to gauge the future direction of the Indian stock market.
Source: Market snaps 3-week run, post biggest weekly drop since 2022