India’s benchmark equity index, the S&P BSE Sensex, plunged over 600 points (approximately 1.2%) in a single trading session, reflecting heightened investor anxiety amid domestic and global headwinds. The Nifty 50 also fell sharply, dropping nearly 2%, with broad-based selling across sectors like banking, IT, and energy.

Immediate Triggers

US Fed Rate Hike Concerns:

• Strong US economic data renewed fears of aggressive monetary tightening, spooking emerging markets.

Rising Bond Yields:

• A surge in US Treasury yields prompted foreign institutional investors (FIIs) to pull funds from Indian equities.

Crude Oil Volatility:

• Brent crude prices hovering above $90/barrel stoked inflation worries, particularly for oil-importing India.

Domestic Pressures:

Weak Corporate Earnings:

• Disappointing Q2 results from major banks and IT firms dented sentiment.

Rupee Depreciation:

• The INR slipping to 83.3/USD heightened concerns about imported inflation and capital outflows.

Sector-Specific Stress:

• Financial stocks faced pressure due to rising NPAs in unsecured loans, while IT stocks reacted to weak global tech demand.

Sectoral Impact

Banking & Financials:

• HDFC Bank, ICICI Bank, and SBI led losses amid concerns over margin pressures and credit growth slowdown.

IT Sector:

• TCS and Infosys dropped 3–4% as clients cut spending in key markets like the US and Europe.

Energy:

• Reliance Industries fell 2% as refining margins softened and oil price volatility persisted.

Expert Reactions

Analysts:

• Attribute the correction to profit-booking after recent gains and caution ahead of key events (e.g., US Fed meeting, state elections).

Economists:

• Warn that persistent FII selling ($1.5 billion pulled in October) could prolong market weakness unless domestic institutions (DIIs) step in.

Brokerages:

• Advise selective buying in sectors like autos and pharma, which showed resilience.

Market Sentiment and Investor Behavior

FIIs:

• Net sellers for the 10th consecutive session, offloading ₹2,300 crore ($275 million) in a day.

Retail Investors:

• Turned cautious, with SIP inflows dipping to ₹16,000 crore in October (from ₹17,000 crore in September).

Historical Context

The Sensex has retreated ~5% from its September 2023 peak of 67,927, though it remains up 6% year-to-date. The current drop mirrors June 2022 levels, when Fed tightening and oil shocks triggered a 10% correction.

Policy Response

RBI Intervention:

• Likely to stabilize the rupee via forex reserves ($586 billion as of October 2023).

Government Measures:

• Focus on curbing inflation (e.g., fuel tax cuts, food supply management) to ease market nerves.

Outlook

Short-Term:

• Volatility may persist until clarity emerges on US rates, geopolitical tensions (Israel-Hamas war), and domestic election outcomes.

Long-Term:

• India’s growth narrative (7% GDP forecast for FY24) and stable DII inflows could cushion further downside.

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