During Thursday's trading session, the benchmark stock indices, namely the S&P BSE Sensex and the NSE Nifty 50, encountered a significant downward movement following a marginal opening, raising concerns among investors.
Around 1:50 pm, the Sensex registered a substantial decline of 454.57 points, reaching 65,664.12, while the Nifty 50 observed a drop of 142.70 points, falling below the 19,600 level to 19,573.75.
This increased volatility in today's trading session also impacted broader market indices. The India VIX, which measures the market's anticipation of near-term volatility, witnessed a surge of more than 11 percent, reflecting growing unease among investors.
One of the primary contributing factors to this heightened volatility is the intensified selling activity by foreign institutional investors (FIIs). Data from stock exchanges reveals that in September, FIIs have become net sellers, divesting equities worth over $1.5 billion.
This shift in FII sentiment has taken the domestic markets, particularly benchmark equities, by surprise. Over the previous six months, FIIs had consistently been net buyers.
Adding to the market's unease is the deteriorating global economic landscape, exacerbated by the US Federal Reserve's hawkish stance. Global equity markets have been grappling with increasing pressure due to rising US Treasury yields and a strengthening US dollar.
These concerns stem from the Federal Reserve's recent transition to a more hawkish stance, which has raised fears of extended periods of elevated interest rates.
Another factor contributing to market unease is the recent overnight surge of 3 percent in crude oil prices. This price increase presents a significant challenge for India, the world's third-largest oil importer. India is already contending with the consequences of lower-than-expected monsoon rains, which have heightened concerns about inflation risks.
These factors have had repercussions across various sectors. Sectoral indices, such as Nifty Bank, Nifty Financial Services, and Nifty Auto, have been notably impacted. The IT and FMCG sectors, in particular, bore the brunt, with each experiencing a substantial decline of nearly 2 percent. Among the constituent stocks of Nifty IT, all faced a downturn, with Tech Mahindra witnessing a substantial drop of over 4 percent.
Ameya Ranadive, a research analyst at Choice Broking, highlighted that the scheduled monthly expiry of derivative contracts "is expected to sustain heightened market volatility."
In light of the increased volatility in the current scenario, Ranadive advised market participants to approach their trades with caution.
