Stock market news: Sensex crashes 1%; India VIX jumps 9%; why did Indian stock market fall today?- explained

Stock market news: The Indian stock market benchmarks, Nifty 50 and Sensex, failed to hold the gains observed in early trade on Friday, May 3, as they lurched sharply lower due to profit booking across sectors.

Nifty 50 opened 118 points higher at 22,766.35 against its previous close of 22,648.20 and rose about 0.65 per cent to 22,794.70. The index, however, erased all gains, dropping 1.3 per cent to 22,348.05 during the session.

Sensex opened 407 points higher at 75,017.82 against its previous close of 74,611.11 and extended gains to 484 points, or 0.65 per cent, to 75,095.18. The index, however, soon fell 1.5 per cent to 73,467.73.

The Nifty 50 closed 172 points, or 0.76 per cent, lower at 22,475.85 with 35 stocks in the red.

Shares of Coal India, Grasim and ONGC ended as the top gainers in the Nifty index, rising 1-5 per cent. On the flip side, shares of Larsen & Toubro, Maruti and Nestle ended as the top losers in the index, falling 2-3 per cent.

The 30-share pack Sensex settled with a loss of 733 points, or 0.98 per cent, at 73,878.15 with 24 stocks in the red.

The selloff was broad-based as the BSE Midcap index fell 0.21 per cent while the Smallcap index declined 0.55 per cent.

The overall market capitalisation of BSE-listed firms dropped to nearly ₹406.2 lakh crore from nearly ₹408.5 lakh crore in the previous session, making investors poorer by about ₹2.3 lakh crore in a single session.

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Volatility index India VIX dropped nearly 9 per cent to a level slightly below 15, indicating nervousness in the market.

Why did the Indian stock market fall today?

The Indian stock market has recently experienced notable volatility. Over the past five sessions, the Nifty has been rising and falling alternatively.

Fundamental factors

Experts are of the view that the market is witnessing healthy correction at the higher levels. They find this profit booking in line with expectations and do not consider it a matter of concern.

"Recently we clearly outperformed global markets. Some bit of profit booking should not matter. Largely, the selloff is evenly spread, so it is not about select stocks," said Pankaj Pandey, Pankaj Pandey, ad Retail Research at ICICI Direct.

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"Today’s fall in equity markets can be attributed to profit booking at higher levels wherein benchmark indices are trading closer to all-time highs. Additionally, investors seem to have adopted a cautious stance ahead of the crucial non-farm payrolls data in the US which would provide strong signals about the probability of rate cuts in future," said Manish Chowdhury, Head of Research, StoxBox.

Chowdhury is also positive about the market from a short to medium-term perspective.

"With crude oil receding from highs, no major negative surprise on the corporate earnings front till now and strong domestic economic indicators, we do not foresee any major reaction in markets currently and hold a positive bias on markets in the short-to-medium term," said Chowdhury.

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Amit Goel, Co-Founder & Chief Global Strategist at Pace 360 underscored the rise in volatility is due to a combination of global and domestic factors.

"Globally, the speculation surrounding the timing and magnitude of the season's first Fed rate cut and selling pressure from FIIs in emerging markets plays a pivotal role. The NFP data from the US expected later today is also a factor in today's volatility," said Goel.

"Domestically, factors such as the announcement of Q4 results, the jitters rally of pre-election results, and the high level of margin trading contribute significantly to the heightened market fluctuations. We believe volatility could rise even further as we inch closer to the 4th of June election results date," Goel said.

Technical factors

According to Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, Nifty faces a critical support level of around 22,300 while encountering resistance around the 22,800 mark.

Patel pointed out that on April 22, 2024, the India VIX hit a notable historical low, reaching around 9.85. Following this, there was an anticipation in the market that it would experience a significant rebound, which indeed transpired, particularly evident in Nifty’s volatility.

Over the course of the current week, the India VIX has surged by approximately 38-39 per cent, presently hovering around the 15 mark. It's plausible to expect a potential cooldown in India VIX, primarily because substantial resistance exists around the 16 zone, Patel observed.

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Mandar Bhojane, an equity research analyst at Choice Broking pointed out that the Nifty's downward movement today was accompanied by the formation of a strong bearish candle on the daily chart, indicating a shift in momentum.

He, however, added that the overall trend remains bullish.

According to Bhojane, immediate support levels are identified at 22,300 and 22,200, while resistance is at 22,700 and 22,800. If the index closes above 22,800, the next resistance level stands at 23,000.

"Examining the Open Interest (OI) data, we find that the highest OI on the call side is at 22,800 and 23,000 strike prices, serving as robust resistance levels. Conversely, the highest OI on the put side is at the 22,000 strike price. Notably, there has been a significant reduction in OI at put strike prices like 22,700 and 22,650, suggesting a trend of long unwinding in Nifty positions. This data provides valuable insights into the market's sentiment and potential future movements," said Bhojane.

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