Welcome to another episode of ET Market Watch, where we bring you daily market updates, stock movements, and trends. In today’s news, investors faced a major setback as the Sensex dropped 733 points at closing, leading to a loss of over Rs 2 lakh crore. Let’s delve into the 7 key factors that contributed to this bloodbath in the market.
Firstly, the decline in index heavyweight stocks such as RIL, L&T, HDFC Bank, and Airtel played a significant role in erasing the morning gains and pulling down the headline indices.
Secondly, India VIX, a measure of volatility, witnessed a surge of over 12% during the day, reaching 15.12. This increase in volatility was driven by market sentiments, Q4 earnings, elections, and the delayed timing of the US Fed’s interest rate cut, which has now been pushed even further. At the closing bell, India VIX stood at 14.62, up by 8.72%.
Thirdly, inflation fears added to today’s market turmoil. The US Fed’s May policy acknowledged limited progress in achieving its inflation goal and emphasized the uncertainty surrounding the inflation trajectory. Market expectations of higher US interest rates for a longer duration have led to the pricing in of just one rate cut in 2024. The US non-farm payroll (NFP) data, scheduled for later today, also contributed to the volatility witnessed in the market.
Moreover, the inflation trajectory in the US has caused a delay in the timing of the first Fed rate cut for this season. This has raised concerns among investors about whether the Fed will be able to implement rate cuts at all in 2024.
Additionally, pre-election jitters have intensified market speculations and resulted in increased wild swings. Analysts anticipate even higher volatility as we approach the election results scheduled for the 4th of June.
Furthermore, the market awaits indicators of future crude supply from the world’s leading producer. The OPEC+ group, in a recent report by Reuters, mentioned the possibility of extending voluntary oil output cuts of 2.2 million barrels per day beyond June if the demand for oil does not increase. Brent crude futures for July closed at $83.98 a barrel, up by 31 cents, while U.S. WTI crude for June ended at $79.21 per barrel, experiencing a rise of 26 cents.
In conclusion, the market crash witnessed today has been influenced by multiple factors. It is crucial for investors to closely monitor the index heavyweight stocks, volatility levels, inflation concerns, interest rate decisions by the US Fed, election developments, US jobs data, and future trends in crude supply. Stay tuned for more updates on the market’s recovery and potential investment opportunities.
To read more about today’s market crash and its impact, click here.
