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The Indian stock market experienced a significant downturn on Thursday, November 21st, with the Sensex and Nifty 50 indices plunging by approximately 1% each. This sharp decline was attributed to a confluence of factors, primarily stemming from the ongoing Adani Group saga, disappointing Q2 earnings reports, escalating geopolitical tensions, persistent foreign portfolio investor (FPI) selling, and technical market weakness. The market's overall capitalization witnessed a substantial drop, reflecting a significant loss for investors within a single trading session. The initial market openings already showcased a negative trajectory, signaling a day of considerable volatility and losses. The downward trend persisted throughout the morning, indicating a widespread sell-off across various market segments, including mid and small-cap stocks.
The Adani Group, already under scrutiny, faced a major setback with the US indictment of Gautam Adani and other senior executives on bribery charges. This indictment, alleging a multibillion-dollar bribery and fraud scheme involving securing solar energy contracts, significantly impacted investor confidence. Several Adani Group shares plummeted, hitting their lower circuits, and contributing substantially to the overall market decline. The accusations leveled by US authorities highlighted the alleged payment of over $250 million in bribes to Indian government officials, further exacerbating concerns about corporate governance and transparency within the group. The impact on the market was immediate and substantial, with shares of Adani Enterprises and Adani Ports among the worst performers.
Adding to the market's woes were the disappointing Q2 (July-September) earnings reports released by numerous Indian companies. These results fell short of market expectations, revealing a slowdown in revenue and profit growth compared to the previous quarter. A Mint report highlighted that while the combined revenue of BSE-listed companies saw an increase, the growth rate was slower than the previous quarter, signaling a potential weakening in overall economic activity. The net profit growth also slowed down, indicating a broader trend of declining corporate performance. Experts pointed to specific sectors, such as oil and gas, metals, cement, chemicals, and consumer goods, as contributing factors to this overall slowdown, highlighting weaknesses in consumption and asset quality in some segments of the banking, financial services, and insurance (BFSI) sector. Reduced government spending was identified as an additional factor impacting earnings growth.
The escalating geopolitical situation, particularly the ongoing Russia-Ukraine conflict, further added to the market's negative sentiment. The signing of a revised nuclear doctrine by Russian President Vladimir Putin, following the US approval of longer-range missiles for Ukraine, heightened concerns about potential escalation and further instability. This uncertainty led many market participants to adopt a wait-and-watch approach, prioritizing caution over aggressive investment strategies. While the immediate impact might not be as dramatic as other factors, the ongoing uncertainty remains a significant threat to market stability, potentially leading to continued volatility and investor hesitancy.
Foreign portfolio investors (FPIs) have played a significant role in the recent market downturn, consistently selling Indian equities. Data from NSDL revealed substantial FPI selling in October and continued selling in November, adding significant downward pressure on the market. This persistent outflow of foreign capital reflects broader global economic concerns and a reassessment of investment opportunities, contributing to a general bearish sentiment towards the Indian stock market. The substantial amounts of capital withdrawn from Indian markets indicate a significant loss of confidence among international investors.
Technical indicators also contributed to the market's negative trajectory. The Nifty 50 index fell below its 200-day moving average (DMA), a key technical level often used to gauge market trends. Experts viewed this as a signal of weakening market strength, suggesting further potential for decline. Specific support levels were identified as crucial to the market’s near-term trajectory, indicating the critical importance of these levels in determining the market's recovery prospects. The overall weak market texture underscored the need for caution and informed decision-making by investors in navigating this period of significant market uncertainty and instability.