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The Indian stock market experienced a significant downturn on Monday, November 18th, 2024, as both the benchmark Sensex and Nifty indices registered substantial declines. This marked the seventh consecutive day of losses for the Nifty, highlighting a persistent bearish trend in the market. The Sensex plummeted by 241.30 points (0.31%), closing at 77,339.01, while the Nifty shed 78.90 points (0.34%), settling at 23,453.80. This downturn was largely attributed to a widespread sell-off in IT and oil shares, exacerbated by ongoing foreign fund outflows and negative cues from the US markets. The intraday decline was even more pronounced, with the Sensex falling as much as 615.25 points (0.79%) before recovering slightly. This sustained bearish sentiment reflects a confluence of factors impacting investor confidence and market sentiment.
Several prominent companies contributed significantly to the market's decline. Key laggards among the Sensex's 30 components included IT giants Tata Consultancy Services and Infosys, along with NTPC, HCL Technologies, Axis Bank, Tech Mahindra, Bajaj Finserv, Sun Pharma, IndusInd Bank, and Reliance Industries. These losses underscore the negative impact of the sell-off on some of India's largest and most influential companies. Conversely, some companies managed to buck the trend, with Tata Steel, Hindustan Unilever, Mahindra & Mahindra, Nestle, and State Bank of India among the gainers. This divergence in performance points to the sector-specific nature of the market's reaction to the prevailing economic conditions and investor sentiment.
The outflow of foreign institutional investor (FII) funds played a crucial role in the market's downturn. Exchange data revealed that FIIs offloaded equities worth ₹1,849.87 crore on Thursday, November 14th, 2024. This continues a larger trend of FII withdrawals, with a total of ₹22,420 crore withdrawn from Indian equity markets in November alone. The cumulative outflow for 2024 so far stands at a substantial ₹15,827 crore. Several factors contribute to this trend, including high domestic stock valuations, increased allocations to China's equity markets, the strengthening US dollar, and rising US Treasury yields. These global macroeconomic factors exert significant pressure on Indian equities, affecting investor decisions and leading to capital outflows.
Market analysts offered insights into the reasons behind the ongoing consolidation and sell-off. Vinod Nair, Head of Research at Geojit Financial Services, pointed to a confluence of factors dampening investor sentiment. These include a slowdown in earnings growth, a weak Rupee due to inflation, and a negative reaction from IT stocks to reduced expectations of a Fed rate cut in December. The delay in potential Fed rate cuts could delay spending in the BFSI (Banking, Financial Services, and Insurance) segment, further impacting IT sector performance. The broader market also reflected this negativity, with the BSE smallcap index declining by 0.69% and the midcap index dipping by 0.17%.
Sectoral performance mirrored the overall market trend. The BSE IT index experienced the most significant decline, falling by 2.34%, followed by the tech (1.99%), oil & gas (1.64%), energy (1.21%), utilities (1.04%), and power (0.58%) sectors. Conversely, the metal sector emerged as a strong gainer, jumping 2.14%, alongside positive performance in realty (0.62%), auto (0.58%), services (0.53%), consumer durables (0.29%), and bankex (0.22%) sectors. Overall, market breadth remained negative, with 2,486 stocks declining against 1,611 advancing stocks on the BSE, while 127 remained unchanged. This demonstrates a widespread bearish sentiment across the broader market.
International markets also contributed to the negative sentiment. While some Asian markets like Seoul and Hong Kong closed higher, Tokyo and Shanghai ended lower. European markets traded in negative territory, echoing the negative trend observed in the US markets on Friday, November 15th, 2024. Despite this, the global oil benchmark, Brent crude, climbed 0.49% to $71.39 a barrel. This suggests that the downturn was primarily driven by domestic and global macroeconomic factors, rather than a singular event impacting energy prices.
In conclusion, the substantial decline in the Indian stock markets on Monday, November 18th, 2024, reflects a combination of factors. The sell-off in IT and oil shares, fueled by persistent foreign fund outflows, negative global cues, and concerns about earnings growth and inflation, contributed significantly to the market’s weakness. While some sectors showed resilience, the overall bearish trend highlights the vulnerability of the Indian market to both domestic and international macroeconomic headwinds. The continuation of this trend will depend on several factors, including FII sentiment, global economic developments, and the performance of key sectors within the Indian economy.
Source: Sensex drops 241 points; Nifty falls for seventh day on selling in IT, oil shares