Investors lost over Rs 2 lakh crore after Sensex dropped 733 pts at closing. 7 key factors behind today’s bloodbath. Sensex after falling over 1000 points during the day, closed 733 points down at 73,878 while Nifty closed at 22,475.
1) Index heavyweights
Markets erased morning gains due to losses in RIL, L&T, HDFC Bank, and Airtel. These stocks pulled down the headline indices, the most in terms of their contribution to the respective indices.
2) India VIX
India VIX, which is a measure of volatility, shot up by over 12% to 15.12 in the intraday due to market sentiments, Q4 earnings, elections and the timing of interest rate cut by the US Fed shifting even further. At closing, it was at 14.62, up by 8.72%.
3) Inflation fears
In its May policy, the US Fed acknowledged limited progress toward its inflation goal and highlighted that the inflation path remains uncertain. As per Rajani Sinha, Chief Economist, CareEdge Ratings – Markets expect US interest rates to stay higher for longer and are pricing in just one rate cut in 2024.US NFP data due later today was also a factor in today’s volatility.
4) Higher-for-longer interest rates
The inflation trajectory in the US has delayed the timing of the season’s first Fed rate cut. Investors are now beginning to doubt whether the Fed would be in a position to go for rate cuts at all in the CY 2024 or not
5) Pre-election jitters
Market speculations amid elections are also causing increased wild swings. Analysts believe volatility could rise even further as we inch closer to the 4th June election results date.
6) US Jobs Data
Jobs data from the US will be released on Friday. This report gives an idea about the strength of the country’s job market, and the Fed considers it when setting interest rates.
7) Crude supply concern
The market also awaits indicators of future crude supply from the world’s top producer. Earlier Reuters reported that the OPEC+ group could extend its voluntary oil output cuts of 2.2 million barrels per day beyond June if oil demand does not increase.
Brent crude futures for July edged up 31 cents and ended at $83.98 a barrel while U.S. WTI crude for June rose by 26 cents and ended at $79.21 per barrel.
