Why is the Indian Stock Market Falling for the Last Three Days? Explained with Five Reasons

The Indian stock market has been in a downward spiral for the past three days, with the Nifty 50 index and BSE Sensex both experiencing significant losses. On Friday, the Nifty 50 opened at 25,093, plummeting to an intraday low of 24,879, a decline of around 400 points. Similarly, the BSE Sensex started at 82,171 and sank to 81,304, marking an intraday loss of 867 points. Over the past three sessions, the Sensex has shed approximately 1,250 points.

Several factors have contributed to this market downturn. Here’s a detailed look at the top five reasons:

1. US Federal Reserve Meeting Uncertainty

The primary reason behind the recent stock market decline is the uncertainty surrounding the upcoming US Federal Reserve meeting. Market participants are apprehensive about the Fed’s decision on interest rates. A potential 25 basis points rate cut might not be sufficient to boost market sentiment, whereas a 50 basis points cut or more could have a more significant positive impact on global markets. Consequently, investors are offloading their positions to mitigate risks ahead of the Fed’s announcement, creating a downward pressure on markets.

2. Overbought Conditions

Prior to this sell-off, the Indian stock market had experienced a sustained rally for 14 consecutive days. This prolonged upward movement led to overbought conditions, making the market susceptible to correction. According to Seema Srivastava, Senior Equity Research Analyst at SMC Global Securities, the current decline should be seen as a phase of profit-taking rather than a fundamental shift in market dynamics.

3. Rebound in US Dollar Rates

The US dollar has seen a rebound following a revision in the US inflation average. Last week, the dollar index touched a seven-month low but has since recovered to near the 101 mark, gaining approximately 1% over the last three days. This rebound in the dollar’s value has led to increased demand for foreign exchange and US treasuries, further impacting global markets, including India.

4. US Job Data

Recent US job data has shown a decline in job openings to a three-and-a-half-year low, signaling a slowdown in the US labor market. This data has added to the global market’s woes, as weaker job growth in the US can have ripple effects across international markets, including India’s.

5. Concerns Over US Inflation

Fears of a slowdown in the US labor market have reignited concerns about inflation in the US. This has raised doubts about the Federal Reserve’s stance on rate cuts. Even if the Fed opts for a more dovish approach, there are concerns that the rate cut might be limited to 25 basis points, which may not be sufficient to alleviate market fears.

Stocks to Buy Amid the Market Downturn

Despite the market downturn, there are still opportunities for value picks. Seema Srivastava from SMC Global Securities suggests focusing on sectors such as banking, infrastructure, power, FMCG, and pharma. Recommended stocks include IPCA Labs, City Union Bank, Bajaj Consumer, Amara Raja Energy, and PNC Infra, which may offer potential upside during this volatile period.

The ongoing market correction highlights the complex interplay of global and domestic factors influencing investor sentiment. As always, staying informed and making strategic investment decisions based on comprehensive analysis is crucial during such periods of volatility.