April 20, 2024

Causes behind recent declines in the Indian stock market

Over the past few days, both the Nifty 50 and Sensex indices have seen a notable dip.

Over the past few days, both the Nifty 50 and Sensex indices have seen a notable dip.

In the recent days, the Indian stock market, represented by Nifty 50 and Sensex, has experienced a downward trend, prompting concerns among investors. Let’s break down the key events and factors contributing to this decline.

Market Performance on Thursday:

On Thursday, the Nifty 50 index opened at 21,414.20, slightly lower than the previous day’s close of 21,571.95. Throughout the day, it reached an intraday low of 21,285.55 and eventually closed 110 points, or 0.51%, lower at 21,462.25. Similarly, the Sensex opened at 71,018.86, fell to an intraday low of 70,665.50, and closed 314 points, or 0.44%, lower at 71,186.86.

The Nifty Bank index also faced a downward trend, opening lower and hitting an intraday low of 45,430.

Recent Market Trends:

Over the last three consecutive sessions, the Nifty 50 index has witnessed a decline from 22,097 to 21,406, indicating a loss of 691 points during this period. The BSE Sensex recorded a substantial drop from 73,128 to 70,891, translating to a loss of 2,237 points. Additionally, the Bank Nifty index saw a decline of 2,728 points in the same three-day period.

Reasons Behind the Market Decline:

Experts in the stock market attribute the recent downturn to five primary reasons:

  1. Hawkish US Fed: The US Federal Reserve’s stance against expected interest rate cuts has impacted global markets, including India.
  2. Disappointing Chinese Economic Data: Mixed economic data from China has contributed to market concerns and reactions.
  3. Rise in US Bond Yields: The recent increase in US bond yields has influenced investor sentiments globally.
  4. Middle East Tensions: Ongoing geopolitical tensions in the Middle East have added to the overall uncertainty in the market.
  5. Overbought Conditions: The Indian stock market has been experiencing overbought conditions, prompting profit booking by investors.

Analysts’ Perspectives:

Deepak Jasani, Head of Retail Research at HDFC Securities, suggests that if the Nifty 50 index breaches the 21,449 mark, it could potentially decline further to around the 21,000 level in the coming days. He also notes that 21,851 might act as a resistance level.

Saurabh Jain, Equity Head, Research-Fundamentals at SMC Global Securities, advises investors to approach market downturns cautiously. Timing the market is challenging, but during declines, gradually accumulating positions in fundamentally robust stocks and sectors could be a prudent strategy. Jain emphasizes focusing on the long-term perspective rather than being swayed by short-term market fluctuations.

Investment Strategy Amidst Market Volatility: Indian stock market

In times of market uncertainty, investors are encouraged to consider the following:

  1. Gradual Accumulation: Instead of reacting impulsively to market fluctuations, gradually accumulate positions in fundamentally strong stocks.
  2. Focus on Fundamentals: Evaluate the fundamentals of sectors and specific stocks. If they remain strong despite short-term declines, consider it an opportunity to strengthen your portfolio.
  3. Long-Term Perspective: Adopt a long-term investment perspective, looking beyond short-term market movements.

While market downturns can be unsettling, they also present opportunities for strategic investment decisions. By staying informed and aligning investments with fundamentals, investors can navigate the fluctuations and position themselves for potential long-term gains in the Indian stock market.

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