For stock market investors, it is Terrifying Thursday. With the BSE Sensex falling below 72,500 and the Nifty dipping below a critical support of 22,000, selling pressure appears to have increased, with 'uncertainty' being a significant term.
A poor voter turnout in the 2024 general elections has tamed the Dalal Street bulls, despite the fact that the BJP's third term remains the most likely outcome. Recent FPI selling amid high market valuations, expectations of no Fed rate cuts this year, unsurprising earnings, and geopolitical concerns have all weighed on key indices, with every three companies listed on the BSE falling for every one rising. At one time, the overall market value of BSE stocks fell by more than Rs 7.6 lakh crore. The BSE m-cap closed at Rs 3,93,13,049.66 crore, down from Rs 4,00,69,409.62 crore the day before.
Here are the factors bearing on the stock market:
Elections
Low voter turnout throughout the first three stages of the 2018 general elections has negatively impacted market sentiment. A further drop in voter turnout in the coming election stages could have an impact on election results and stocks, so keep an eye on it, PhillipCapital stated earlier today.
Although decreased turnout may impact some constituencies, it is unlikely to significantly impact the BJP's predicted victory. We are not specialists, therefore we cannot forecast how many seats the BJP/NDA will win, but we believe that 400+ seats are implausible; nonetheless, if the coalition achieves that amount, equity markets should rally. If a lower NDA seat count of 300-330 produces a knee-jerk market reaction (a decrease), we will view it as a buying opportunity," it stated.
PI Selling and Market Valuations
Foreign outflows rose to Rs 5,076 crore in May, according to statistics from depository NSDL. This is in addition to the Rs 8,671 crore outflows from April. "In addition to high US bond yields, there is a new reason driving FII selling. This is an outperformance of the Chinese and Hong Kong markets. While the Nifty has fallen 1.5 percent in the last month, the Shanghai Composite has risen 2.62 percent, and the Hang Seng has risen an impressive 8.8%. "The Chinese and Hong Kong markets are cheap, with PEs around 10, whereas India is expensive, with double the PE of these markets," says VK Vijaykumar of Geojit Financial Services.
Q4 Earnings
So far, the earnings season hasn't delivered any positive surprises. According to Motilal Oswal Securities, results for the fourth quarter of fiscal year 24 have been consistent, with Reliance Industries, HDFC Bank, Coal India, Axis Bank, Kotak Mahindra Bank, Ultratech Cement, Bajaj Auto, Tech Mahindra, Nestle, and SBI Life Insurance beating profit projections. HCL Technologies, LTIMindtree, Titan, and HDFC Life Insurance, on the other hand, missed Motilal Oswal's earnings predictions for the fourth quarter of Fiscal Year 24.
"The earnings season has been lukewarm thus far, with mid and small caps reporting earnings downgrades compared to their large size counterparts. This season saw no significant comeback in consumer basics, and growth in the IT sector has been limited. Furthermore, sluggish export demand and delayed B2B execution owing to the elections are projected to keep earnings low in the foreseeable future," Axis Mutual Fund warned.
Fed Concerns
While the May FOMC meeting was largely dovish, concerns about delays in Fed rate decreases remain.Prashanth Tapse, Senior VP (Research), Mehta Equities, stated that investors are concerned about increased valuations and an uninspired Q4 results season.
"With the US Fed delaying its rate cut decision and inflation still above the comfort level, investors would be risk averse and mostly resort to selective bullish bets," he stated.
Geopolitical Tensions
Concerns over continued tensions in West Asia and the Russia-Ukraine conflict are also weighing on market mood.
