Indian Stock Market Crash Reason: Despite festive season has started in India with the start of Navratri, Indian Stock Market has been on a decline for the past 6 consecutive days. As a result, Sensex Crash or NIFTY Crash has been trending on Google Trends. In a festive season when Indians spend their money on almost everything and hence, the Indian Stock Market in such scenario always observe a rise. However, Indian Stock Market has been crashing down for the past six days.
For the unversed, Sensex had set an all-time high of 85,978.25 points exactly a week ago. Thereafter, Sensex fell more than 5000 points from its high. At the end of trading on Monday, Sensex closed 638 points down at 81,050. At the same time, Nifty closed 218.85 points down at 24,795.75 points, Nifty also made a record all-time high of 26,277 points last week. From where Nifty has fallen by about 1500 points. Retail investors have started panicking due to this fall. Because in the last 6 days of decline, the hard earned money of the investors has been lost, even though the index has fallen by 7 to 8 percent, but the portfolios of some investors have fallen by 20 percent.
Now, the question arises why the Indian Stock Market is crashing or what is the reason behind Indian Stock Market Crash (Indian Stock Market Decline Reason, Indian Stock Market Crash Reason)- Let's understand in detail-
1) FII's withdrawal from Indian market (FII Outflows)
Foreign investors are continuously withdrawing money from the Indian market. In just 5 days, FII has withdrawn about 40 thousand crores from the Indian market, Monday's figure is not yet added to it. It is being said that foreign investors can turn towards China. Because last week a relief package has been announced in China to strengthen the economy. Due to which foreign investors are getting attracted to the Chinese stock market in the short term, due to which they are withdrawing money from the Indian markets.
2) Inflated valuation
In the Indian stock market, the prices of most stocks seem expensive compared to the earnings. Only the banking sector is currently available at fair value. Compared to China, Indian markets are trading at twice the valuation. Due to which big investors are avoiding buying. As last reportd, NIFTY was trading at 21.5 times its one-year forward earnings, which is above its historical average of 20.4 times. On the other hand, MSCI China gauge is still trading at 10.8 times forward earnings, which is less than its five-year average of 11.7 times.
3) Exit polls of states
Most of the exit polls predicted that Congress is coming back to power in Haryana while Congress & NC coalition government is coming to power in Jammu and Kashmir. It means BJP is loosing its ground and the Modi factor is fading from the BJP. As Haryana is an important state of the country from the point of view of industry, therefore if there is a change of power here, then changes in policy can also be seen. Haryana has industries hubs like Gurugram, Faridabad and Rohtak. There are many big companies of the country here. If the government changes and Congress comes to power, then the central government may face some challenge in policy making. Apart from this, the results of Jammu and Kashmir are also not according to the market.
4) Second quarter results (Q2 results)
After a few days, the results of the second quarter will start coming. The stock market is not excited about the earnings in the second quarter. The market feels that there may be a slight increase in growth from the third quarter, as the festive season demand may increase, and its effect may be seen in the third quarter results, so the market does not expect any major game changing regarding earnings in the second quarter.
5) Tensions in Middle East- Iran-Israel war & Oil Proces
The global turmoil has spoiled the mood of the market. a tense situation remains between Iran and Israel. Last week, due to this reason, there was a big decline in the market. Apart from this, there has been a jump in the prices of crude oil. Due to which the pressure on the economy is increasing. If the war does not stop then the prices of crude oil may rise further.