Sensex, Nifty crash: Rs 7,60,000 crore gone! What's spooking your stock market? 5 factors

For stock market investors, today is Terrifying Thursday. With the BSE Sensex plunging below 72,500 level and Nifty slipping below a key support of 22,000, selling pressure seems to have intensified with 'uncertainty' being a key buzzword. 

A low voter turnout in general elections 2024 has tamed the Dalal Street bulls, even as a third term for BJP is still the base case. The recent FPI selling amid high market valuations, fears of no Fed rate cuts this year, not-so-surprising earnings and geopolitical concerns have all taken a toll on key indices, with every three stocks listed on BSE falling for every on that rose. BSE stocks lost over Rs 7.6 lakh crore in combined market capitalisation at one point. The BSE m-cap later stood Rs 3,93,13,049.66 crore against Rs 4,00,69,409.62 crore a day ago. 

Here are the reasons weighing on the stock market:

Elections
Low voter turnout in the first three phases on ongoing general elections have hurt market sentiment. A further worsening of voter turnout in the following election phases could have a bearing on election outcome and equities – so one would keep a close watch, PhillipCapital said earlier today. 

"The turnout (so far) is a tad lower and while this could affect the outcome for a few
constituencies, it is unlikely to majorly dent the widely expected outcome of BJP returning to power. We are not experts, so we cannot predict the number of seats that BJP/NDA would win, but we reckon that 400+ seats seem unlikely; however, in case the alliance manages that number, equity markets should rally. If a lower 300-330 seats for the NDA results in a knee jerk market reaction (a fall), we would treat it as a buying opportunity," it said.

FPI selling, market valuations
Foreign outflows jumped to Rs 5,076 crore in May, data from depository NSDL suggest. This is in addition to Rs 8,671 crore outflows in April.  "There is a new factor triggering FII selling, apart from the high US bond yields. This is the outperformance of the Chinese and Hong Kong markets. During the last one month while Nifty is down 1.5  cent the Shanghai Composite is up by 2.62 per cent and Hang Seng is up by a whopping 8.8%. Chinese and Hong Kong markets are cheap with PEs around  10 while India is expensive with double the PE of these markets," VK Vijaykumar of Geojit Financial Services.   

Q4 earnings
Earnings season has so far failed to offer any positive surprises. Motilal Oswal Securities said earnings scorecard for 4QFY24 has been in line so far, with Reliance Industries, HDFC Bank, Coal India, Axis Bank, Kotak Mahindra Bank, Ultratech Cement, Bajaj Auto, Tech Mahindra, Nestle, and SBI Life Insurance exceeding profit estimates. Conversely, HCL Technologies, LTIMindtree, Titan, and HDFC Life Insurance missed our profit estimates for 4QFY24, Motilal Oswal said.

"The earnings season has been lukewarm so far and the mid and small caps witnessed earnings downgrades  compared to their large cap counterparts. This season did not witness any major recovery in consumer staples, and growth in the IT sector has been modest. In addition, sluggish export demand and slow B2B execution due  to the elections are all expected to keep the earnings tepid in the near future," Axis Mutual Fund said.

Fed concerns
While the May FOMC meeting was relatively dovish, concerns over delays in Fed rate cuts stay.Prashanth Tapse, Senior VP (Research), Mehta Equities noted that investors are wary of higher valuations and uninspiring Q4 earnings 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 said.
 
Geopolitical tensions
Concerns relating ongoing tensions in the West Asia and Russia-Ukraine war are also weighing on the market sentiment.