Indian Stock Market Plunges Amid Election Jitters and F&O Expiry

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Indian Stock Market Suffers Major Selloff Amid Election Uncertainty and Expiry of F&O Contracts

Team FS

30/May/2024

Key Points:

Indian stock market sees sharp decline ahead of election results and F&O contract expiry.
Sensex and Nifty 50 record fifth consecutive session of losses, impacting investor wealth.
Broader market and sectoral indices also suffer, with few exceptions like banking stocks.

The Indian stock market faced a severe selloff on Thursday, May 30, as market participants reacted to the twin pressures of the expiry of May futures and options (F&O) contracts and the looming uncertainty surrounding the upcoming Lok Sabha election results. Investors were on edge ahead of the final phase of the elections, set for June 1, and the vote counting scheduled for June 4. This nervousness has persisted despite most experts predicting a re-election of the BJP-led National Democratic Alliance (NDA), although doubts remain about the strength of their majority.

Over the last five trading sessions, both the Sensex and the Nifty 50 have experienced consistent declines, each dropping around 2 percent. On Thursday, the Sensex ended with a loss of 617 points, or 0.83 percent, closing at 73,885.60. Similarly, the Nifty 50 dropped by 216 points, or 0.95 percent, ending the day at 22,488.65. This marked the fifth consecutive session of losses, significantly impacting investor sentiment and resulting in a substantial erosion of market capitalisation.

The broader market also reflected this downturn, with the BSE Midcap and Smallcap indices falling by 1.21 percent and 1.33 percent respectively. The overall market capitalisation of firms listed on the BSE decreased to approximately ₹410.4 lakh crore, down from nearly ₹415.1 lakh crore in the previous session, causing investors to lose about ₹4.7 lakh crore in a single session.

Amid the widespread selloff, only a few stocks managed to end in the green. In the Nifty 50 index, ICICI Bank, Axis Bank, and SBI emerged as the top gainers, with ICICI Bank up by 1.45 percent, Axis Bank by 1.06 percent, and SBI by 0.76 percent. In contrast, Tata Steel, Tech Mahindra, and Grasim were among the top losers, with Tata Steel declining by 5.19 percent, Tech Mahindra by 3.16 percent, and Grasim by 2.87 percent.

Sectoral performance also mirrored the overall bearish trend, with most indices ending in the red. Notable exceptions included Nifty Media, which gained 0.48 percent, Nifty Bank, up by 0.37 percent, and the Private Bank index, which rose by 0.32 percent. However, sectors like Nifty Metal, IT, Healthcare, Pharma, Consumer Durables, FMCG, Oil & Gas, and Auto witnessed significant declines, highlighting the broad-based nature of the selloff.

Several factors have contributed to the recent market turmoil. Apart from election-related jitters, global cues have been weak, with rising US bond yields and geopolitical tensions further dampening investor sentiment. Additionally, hopes for early interest rate cuts have waned, adding to the bearish outlook.

In conclusion, the Indian stock market is currently navigating through a period of heightened uncertainty, driven by domestic political factors and external economic pressures. Investors are keenly awaiting the outcome of the Lok Sabha elections, which will be a critical determinant of the market’s direction in the near term. Until then, the market is likely to remain volatile, reflecting the prevailing cautious sentiment.

This article highlights the challenges facing the Indian stock market as it grapples with a combination of election uncertainty, F&O expiry pressures, and broader economic concerns. Investors and market participants need to stay informed and cautious during this turbulent period.

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Indian Stock Market Suffers Major Selloff Amid Election Uncertainty and Expiry of F&O Contracts

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