Indian Stock Market Sees Major Selloff on November 4 : Top reasons

The Indian stock market experienced a significant downturn on Monday, November 4, with the benchmark indices—Sensex and Nifty 50—falling nearly 2% each. Mid-cap and small-cap stocks also plummeted by over 2%. The Sensex opened at 79,713.14 but dropped to 78,349, while the Nifty 50 started at 24,315.75 and fell to 23,847.

Sector Performance

Sector-wise, indices like Nifty Oil & Gas, Media, Consumer Durables, and Realty dropped by 2-3%, while Nifty Bank, Auto, and FMCG sectors saw a decline of around 1%. This widespread selloff reflects broader market concerns.

Key Reasons Behind the Market Crash

Experts have identified several factors contributing to the market's decline:

US Election Uncertainty: Investors are nervous ahead of the upcoming US elections, where opinion polls suggest a tight race between Democratic candidate Kamala Harris and Republican Donald Trump. Analysts predict global market volatility in response to the election outcomes. V K Vijayakumar from Geojit Financial Services noted that while near-term volatility might occur, long-term economic fundamentals will play a significant role in market trends.

High Valuations: Despite recent corrections, stock valuations remain elevated. The current price-to-earnings (PE) ratio for Nifty 50 stands at 22.7, slightly above its two-year average. Analysts argue that the market's rich multiples are likely to persist due to India’s long-term growth potential.

Federal Reserve Policy Impact: The US Federal Reserve is expected to announce a rate cut of 25 basis points on November 7, but this may already be factored into market prices. Higher bond yields due to anticipated increased spending from US candidates could negatively impact the stock market.

Weak Corporate Earnings: Q2 results for Indian companies have been disappointing, raising concerns about future market performance. Analysts suggest that earnings growth may slow down, making current valuations unsustainable.

Foreign Portfolio Investor (FPI) Selling: There has been a sharp selloff from FPIs, with domestic institutional investors also showing caution. The expectation of a new stimulus package from China is drawing funds away from India, contributing to the selling pressure.

Overall, the market capitalization of BSE-listed companies decreased by approximately Rs. 9 lakh crore in a single session, dropping to around Rs. 439 lakh crore. As the market navigates these challenges, investors are urged to remain vigilant in light of ongoing global events​.

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SUMMARY

On November 4, the Indian stock market saw a significant decline, with the Sensex and Nifty 50 indices falling nearly 2% each. The selloff affected mid-cap and small-cap stocks as well, which dropped over 2%. The Sensex started at 79,713.14 but fell to 78,349, while the Nifty 50 opened at 24,315.75 and declined to 23,847.

Several factors contributed to this market crash, including nervousness ahead of the US elections, high valuations of stocks, disappointing earnings reports from Indian companies, and heavy selling from foreign investors. Analysts believe the market's volatility will continue due to these concerns. The overall market capitalization of BSE-listed companies decreased significantly, indicating a loss of about Rs. 9 lakh crore in a single session.

Disclaimer: The information provided in this finance article is for informational purposes only and should not be considered financial advice. The content is based on various sources and reflects the views of the authors and contributors. It is essential to conduct your own research and consult with a financial advisor before making any investment decisions.