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Stock Market Crash: After three days of gains, the domestic stock market witnessed a sharp decline on Friday. Selling in IT and metal stocks, weak global cues, and a cautious mood ahead of the Union Budget on February 1, put both the Sensex and Nifty under pressure. Recent selling by foreign investors and sluggish trends in overseas markets also weakened investor sentiment.
At around 1:20 pm, the Sensex was trading 562.16 points, or 0.68%, lower at 82,004.20, while the Nifty slipped 185.15 points, or 0.73%, to 25,233.75. The market remained positive, with 2,063 shares advancing, 1,695 declining, and 147 remaining unchanged. Hindalco Industries, Tata Steel, and Coal India were among the biggest losers in the Nifty50, falling up to 6%. Apollo Hospitals Enterprise and Tata Consumer Products were among the top gainers, rising up to 2%.
Key Reasons for Market Decline:
1. Profit-booking in Metal Stocks: The Nifty Metal Index fell 4%, indicating profit-booking after three previous sessions of gains. According to Tim Waterer, Chief Market Analyst at KCM Trade, fears of a less dovish Fed Chair, a strengthening dollar, and overbought conditions pressured metal prices.
2. FII Selling Resumed: After Wednesday's brief break, foreign institutional investors (FIIs) resumed selling in Indian markets. FIIs have been net sellers in most sessions so far in January.
3. Crude Oil Prices Surge: Brent crude oil reached a five-month high on Thursday. Prices rose due to fears of supply disruptions due to geopolitical risks related to Iran. High oil prices are negative for a net importer like India.
4. Caution before the Budget: Finance Minister Nirmala Sitharaman will present the Union Budget on February 1. There will be a special trading session on Budget Day, so investors appeared cautious.
5. Weak Global Cues: Japan's Nikkei 225, China's Shanghai Composite, and Hong Kong's Hang Seng were weak in Asian markets. US markets also closed mostly in the red on Thursday.
6. Rise in India VIX: The India VIX, which measures market volatility, rose nearly 4% to 13.85, indicating growing uncertainty in the near term.
7. Selling in IT stocks: The IT sector slipped 2% following a sharp overnight decline in the Nasdaq.
8. Fears of a Hawkish Fed Chair: Gold prices fell more than 4% amid speculation of a more dovish stance at the US Fed. US President Donald Trump said he would announce a successor to Fed Chair Jerome Powell. Gold prices were under pressure in Asian trading on rumors of Kevin Warsh's name, according to Matt Simpson, senior analyst at StoneX.
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