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Business News/ Markets / Stock Markets/  Nifty 50 plummets 3.98% in October so far, biggest monthly drop since June 2022
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Nifty 50 plummets 3.98% in October so far, biggest monthly drop since June 2022

The Nifty 50 started its downward trend on October 17 at around 19,811 levels and dropped significantly to the current level of 18,857, losing 954 points or 4.81%, and from the all-time high of 20,222, the index is down 1,365 points or 7.23%.

Among sectoral indices, Nifty Metal was the biggest laggard in today's trade, dropping as much as 1.62%, followed by Nifty Auto (down 1.59%), and Nifty Oil and Gas (down 1.5%).Premium
Among sectoral indices, Nifty Metal was the biggest laggard in today's trade, dropping as much as 1.62%, followed by Nifty Auto (down 1.59%), and Nifty Oil and Gas (down 1.5%).

It appears that bears have gained strong control over the market, as evident from the sharp decline in the Indian benchmark indices over the last three trading sessions. The Nifty 50 extended its losing streak for the sixth straight session on Thursday and breached the crucial 19,000 mark for the first time since June 28, 2023, and in October so far, the index has lost 3.98% of its value, which is the largest monthly fall since June 2022, when the Nifty 50 tumbled 4.85%. 

The Nifty 50 started its downward trend on October 17 at around 19,811 levels. Since then, it has experienced a substantial decline, currently resting at 18,857 points. This represents a loss of 954 points, equivalent to a decrease of 4.81%. Furthermore, compared to its peak of 20,222 points, the index has faced a decline of 1,365 points, marking a sharp drop of 7.23%.

The index began today's trading session with a sharp gap-down at 19,027 levels compared to the previous closing of 19,122, and it extended the bearish trend during the trade to hit a four-month low of 18,837, down 1.5%

Largest monthly drop over the last two years (Nifty 50)%
June 20224.85%
October 2023 (so far)3.98%
November 20213.90%
September 20223.74%
December 20223.48%
February 20223.15%
May 20232.53%
August 20232.53%
January 20232.45%
April 20222.07%
February 20232.03%
Source: Tradingview 

Indian markets followed a drop in Asian peers after US tech stocks sank dramatically overnight amid disappointing earnings reports and surging Treasury yields. The 10-year US Treasury note rose above 4.9% for the second consecutive trade on Thursday, according to Trading Economics data.

Among the components of the Nifty 50, Mahindra & Mahindra finished Thursday's trade with a drop of 4%, followed by Bajaj Finance (down 3.5%), UPL (down 3.3%), Asian Paints (down 3.3%), Bajaj Finserv (down 3.2%), Nestle India (down 3%), Titan Company (down 2.7%), JSW Steel (down 2.6%), Adani Enterprises (down 2.4%) and Tech Mahindra (down 2.3%).

On the other side, Axis Bank and ITC finished Thursday's trade with a gain of 1.7% and 0.4%, respectively. Among sectoral indices, Nifty Metal was the biggest laggard in today's trade, dropping as much as 1.62%, followed by Nifty Auto (down 1.59%), and Nifty Oil and Gas (down 1.5%).

According to Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, the Nifty 50's recent bearish trend is a culmination of multiple intertwined factors. Sonam said the ongoing Israel-Hamas conflict has heightened geopolitical tensions, instilling uncertainty among investors and prompting a shift away from riskier equities.

India's dependency on oil imports makes it susceptible to the implications of rising crude prices, which are fueled further by Middle East tensions. These prices not only exert inflationary pressures on the Indian economy but also adversely affect sectors like aviation and FMCG, as she pointed out.

“Concurrently, as the yields on US bonds near the 5% mark, they present an attractive proposition to global investors, potentially siphoning capital from emerging markets, including India. A strengthening US dollar amplifies this diversion, indicating investors' preference for safer assets over emerging market equities. This 'risk-off' sentiment is further evidenced by the foreign institutional investors' recent selling trend in the Indian market. While the exact duration of this bearish phase remains elusive, the convergence of these factors points towards continued volatility in the Nifty 50 in the foreseeable future," said Sonam.

Siddhartha Bhaiya, Founder and CIO of Aequitas Investments, states that the Indian market cannot operate independently of other major developing capital markets and would surely be impacted by geopolitical events and uncertainties. Also, he said the decadal increase in USA yields and the narrowing gap between yields in the USA and India have encouraged the outflow of capital funds from India since September.

He further added that the relatively higher valuation in some pockets of the Indian market has encouraged promoters and business owners to dilute their holdings through the primary and secondary sale of paper.

"Our proactive and stringent monetary policy has led to the reversal of excess liquidity in the economy that was supporting the capital markets thus far. Cumulatively, these factors have put downward pressure on the markets. However, given the long-term structural story in India and strong domestic macro indicators, we remain confident long-term investors in the markets," Siddhartha stated.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 26 Oct 2023, 10:31 AM IST
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