Factors for Indian Share market downturn in Oct 2024
The recent downturn in the Indian
stock market is driven by several factors in the current market scenario:
1.
Geopolitical Tensions: Escalating conflict in the Middle East, particularly the Israel-Iran
tensions, has led to concerns about global oil supplies, pushing crude oil
prices higher. Since India is a major oil importer, rising oil prices put
pressure on its economy, leading to negative market sentiment
2.
Foreign Portfolio Investors (FPIs) Selling: FPIs have been pulling out large
amounts of capital from Indian equities, shifting investments to markets like
China due to more attractive valuations there. This capital outflow has been a
major contributor to the market's fall
3.
High Valuations:
Indian stocks were trading at high valuations, making them less attractive to
investors compared to other global markets, such as China. As a result, profit
booking and corrections followed
4.
Weak Global Cues: Global markets have been under pressure due to weak earnings reports
from major U.S. tech companies and economic issues in Europe, such as Germany's
manufacturing slowdown. These factors have negatively impacted investor
sentiment globally, including in India​
5.
Domestic Factors: Upcoming state elections, concerns over corporate earnings, and
below-par quarterly results from Indian companies have added to the market's
weakness
6. Inflationary Pressures: Persistent inflation, particularly in food prices, has affected consumer spending and corporate profits. Rising input costs are squeezing the margins of businesses, particularly in the manufacturing and consumer goods sectors. This is causing concern among investors.
7. Interest Rate Concerns: The Reserve Bank of India (RBI) has maintained a cautious stance on monetary policy, with expectations of potential future rate hikes. Rising interest rates make borrowing more expensive for businesses, which can slow down expansion plans and reduce earnings, thereby hurting stock market sentiment​.
8.
Global
Economic Slowdown: Signs of a broader global slowdown, especially in key
economies like the U.S. and Europe, are weighing heavily on global equity
markets, including India. Weakness in global demand is affecting
export-oriented sectors in India, such as IT and manufacturing, leading to a
sell-off in stocks
9.
Technical Factors: Indian markets have recently breached key technical support levels,
which triggered automated sell orders and further selling pressure from
short-term traders. This has amplified the volatility and accelerated the
market's decline​
These factors, combined with
geopolitical uncertainties, are creating a challenging environment for the
Indian stock market, with investors adopting a more cautious approach amid
heightened volatility.
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