Why Has the Indian Stock Market Been Declining for the Past Three Days? — Explained with Five Key Reasons
Stock Market Update:
Amid uncertainty leading up to the US Federal Reserve meeting this month, the Indian stock market continued its downward trend for the third consecutive session on Friday. The Nifty 50 index began the day on a negative note, opening at 25,093 and hitting an intraday low of 24,879, a loss of approximately 400 points. This decline also caused the 50-stock index to fall below the key 25,000 mark.
Today, the BSE Sensex opened with a gap down at 82,171 and fell to an intraday low of 81,304, marking a drop of 867 points within minutes of the market opening. During this decline, the 30-stock index has lost approximately 1,250 points over the past three consecutive sessions.
Why Is the Indian Stock Market Falling?
Stock market experts attribute the ongoing decline in the Indian share market to two primary factors: uncertainty surrounding the upcoming US Federal Reserve meeting and overbought conditions on Dalal Street. They point out that recent fluctuations in US dollar rates, following a revision in the US inflation average, along with weak US job data and unchanged US jobless claims, have exacerbated the market losses over the past three consecutive sessions.
Here are the top five reasons contributing to the decline in the Indian stock market:
- US Fed Meeting: “A major factor driving the market downturn is the uncertainty surrounding the upcoming US Federal Reserve meeting and its potential interest rate cut announcement. If the Fed opts for a 25 basis point cut, it might not be well received by the market. Conversely, a 50 basis point cut or more could potentially boost global markets. Consequently, investors who prefer to avoid risks are reducing their long positions and preparing for possible market fluctuations following the Fed’s decision,” explains Avinash Gorakshkar, Head of Research at Profitmart Securities.
- Overbought Conditions: “Prior to the recent sell-off in the Indian stock market on Wednesday, the market had experienced a rally for 14 consecutive days. This prolonged upward movement led to an overbought situation, and the current selling can be viewed as a natural phase of profit-taking,” explains Seema Srivastava, Senior Equity Research Analyst at SMC Global Securities.
- Rebound in US Dollar Rates: “Following a revision in the US inflation average last week, there was a rebound in the US dollar, which saw some value buying on Wednesday. This helped the US dollar index recover from a 7-month low, approaching the 100 mark. Currently, the index is near 101, reflecting a gain of about one percent over the past three sessions. This increase in the dollar index has boosted demand in the forex market as well as for treasuries and bonds,” notes Anuj Gupta, Head of Commodities & Currencies at HDFC Securities.
- US Job Data: “US job openings in July have dropped to a three-and-a-half-year low, signaling a slowdown in the US labor market. This development is also impacting global markets, including those on Dalal Street,” states Avinash Gorakshkar of Profitmart Securities.
- US Inflation Concerns: “The slowdown in the US labor market has heightened fears about US inflation, which could prompt the Federal Reserve to reconsider its plans for an interest rate cut. Even if the Fed maintains a dovish approach, there are concerns that any rate cut might be limited to just 25 basis points,” adds Profitmart Securities.
Stocks to Buy Today
Amid the current stock market downturn, Seema Srivastava of SMC Global Securities suggests focusing on sectors such as banking, infrastructure, power, FMCG, and pharmaceuticals for potential value picks.
For those seeking specific stock recommendations, Seema Srivastava has highlighted the following five shares to consider: IPCA Labs, City Union Bank, Bajaj Consumer, Amara Raja Energy, and PNC Infra.
Disclaimer: The opinions and recommendations provided in this article reflect the views of individual analysts and do not necessarily represent the views of Esse India . Investors should consult with certified experts before making any investment decisions.
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