The S&P BSE Sensex slipped over 300 points in morning trade on Wednesday led by losses in ICICI Bank BSE -1.22 %, ITC BSE -1.06 %, HDFC Bank BSE -0.62 %, RIL BSE -1.75 % and TCS BSE -1.44 %.
The Nifty50 slipped below its crucial psychological level of the 8,550 level weighed down by losses in realty, power, oil & gas, metals, consumer durables, capital goods and banking stocks.
So why is the market crashing? Going by the buzz on Dalal Street, here are the top five factors weighing on the market:
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US presidential election: Market participants across the globe have taken a step back and decided to stay on the sidelines ahead of the US presidential election results after media reports suggested that Republican US presidential candidate Donald Trump could be closing the gap with his Democratic rival Hillary Clinton.
A possible Trump victory could lead to uncertainty on several key issues related to foreign policy, trade relations and immigration, while a Clinton win would be viewed more or less as positive by market participants.
An ABC News-Washington Post poll showed Democratic candidate Hillary Clinton with just a 1 percentage point lead, a gap that is within the margin of error.
“We think the calmer scenario clearly is status quo, which ultimately would be Hillary. But if we are going to see a Donald Trump win, it would be disruptive for Asia,” Hartmut Issel, Head of Equities & Credit for Apac, UBS Wealth Management, said in an interview with ETNow.
US Fed policy stance: The US Fed is widely expected to keep interest rates unchanged later on Wednesday, but may set the stage for a hike in December amid signs that the economy is picking up steam. In recent time, the central bank has increasingly grown confident about raising rates.
A rate hike by the US Federal Reserve is likely to result in a strong dollar and a weak rupee. “If the US Fed starts raising interest rates from December, whose chances are very bright, then there could be some debt outflow from India like from other emerging markets,” Dr Rupa Rege Nitsure, Chief Economist, L&T Financial Services, said in an interview with ETNow.
“Luckily, we have good foreign exchange reserve buffer and RBI has been managing the currency quite well. So depreciation will be orderly but definitely currency will depreciate and we may see its lowest level in December. That is my take,” Nitsure said.
FII selling: Foreign institutional investors (FIIs) sold stocks worth about Rs 124 crore while domestic institutional investors (DIIs) bought equity worth Rs 192 crore in the cash segment.
FIIs sold Rs 535 crore worth of contract in index futures and bought Rs 184 crore worth of contracts in index options. In stock futures, they bought positions worth Rs 696 crore.
Fall in crude oil prices: Another factor putting pressure on the market is crude oil prices, which fell for the fourth straight day. Crude oil price has always had a positive correlation with global equities.
Brent crude was down 22 cents at $47.92. In the previous session, it hit a one-month low of $47.72 before settling down for the day at $48.14 ahead of official US stockpile figures.
Goldman Sachs sees crude hitting $40 a barrel if Opec decides not to cut oil output at its meeting scheduled for this month. “Lack of progress on implementing production quotas and growing discord between the Opec producers suggest a lower probability of reaching a deal on November 30,” Goldman analysts, including Damien Courvalin, wrote in a note dated October 31.
Technical charts: The Nifty50 slipped below its crucial support level of 8,550 on Wednesday. Now, a breakdown below 8,500 could accelerate the momentum on the downside, experts said.
The market failed to stay above its crucial resistance level of 8,650 on Tuesday as selling pressure gripped the market. “Traders are advised to remain cautious and square off long positions below the 8,550 level without waiting for the Nifty50 to breach the 8,500 level,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in, told ETMarkets.com.
Rohit Gadia, Founder & CEO, CapitalVia Global Research, said the market is likely to stay volatile and directionless, which is going to be difficult to handle from a short-term trading perspective.
“Positional traders should wait for a breakout of the range between 8,600 and 8,700 levels before they enter the market,” he said.