Stock Market Crash: Indian stock markets have been extremely volatile ahead of the 2024 Lok Sabha election results, with the India VIX index hitting an intraday high of 24.52 today, registering a rise of nearly 90% in a month. Indian voters are gearing up for the seventh and final phase of the 2024 Lok Sabha elections this Saturday, with a flurry of exit poll results expected on Saturday evening. However, ahead of the Lok Sabha election results and exit polls, Indian stock markets continued to trade weakly for the fifth consecutive session. The BSE Sensex today opened with a gap to the downside and hit an intraday low of 74,133, marking its third consecutive session of decline of over 1,200 points.
Stock market experts say the main factors contributing to the decline include uncertainty ahead of the outcome of the House of Representatives elections, rising Treasury yields, tensions in the Middle East, monthly maturities and a hit to expectations of an interest rate cut from the US Federal Reserve.
Why are stocks falling today?
1]Indian Lok Sabha election results unclear: Explaining the reasons for the fall in India’s major stock indexes, Avinash Gorakshkar, head of research at Profit Mart Securities, said, “Today’s rise in India VIX indicates that the market is expected to remain highly volatile till the outcome of the Indian Lok Sabha elections is out. After six terms of Lok Sabha elections, the market is still uncertain about what kind of government will be formed after the elections. That is why the Indian equity market has fallen for the fifth consecutive day.”
2]Rising U.S. Treasury yields: “Better-than-expected consumer confidence data and hawkish comments from Fed officials have sent Treasury yields surging to one-month highs,” said Siddharth Khemka, head of retail research at Motilal Oswal, adding: “While selling pressure from foreign institutions has eased, caution is building as the outcome of big events draws closer, leading to profit-taking.”
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3]Middle East tensions: “Global equities fell on Wednesday as rising tensions in the Middle East (fresh attack on a ship in the Red Sea) pushed up bond yields and surging crude oil prices raised concerns that interest rates may remain high for a long period,” said Deepak Jasani, head of retail research at HDFC Securities.
4]Monthly Expiration Date: “Major equity indexes are down today due to monthly expiry. Rollover rates in early morning trade are low, which is also the reason for the decline in Sensex, Nifty and other major Indian equity indexes. However, rollover rates are expected to pick up in the second half of the year and we may see some recovery in the second half of the year,” said Avinash Gorakshkar, Profit Mart Securities.
5]Federal Reserve rate cut hopes hit hard: “Rising oil prices and rising tensions in the Middle East are expected to put pressure on US inflation, which is reflected in the hawkish talks of the US Federal Reserve. Hence, given the high interest rate regime, the US dollar and the US Treasury market are expected to attract more investments compared to other assets such as gold, stocks and mutual funds. The latest fall in the Indian equity market should also be seen in this perspective,” Gorakshkar said.
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