Will the Nifty 50 Rebound or Continue Its Decline? Is This the Start of a Financial Crisis?

At the close, the Nifty 50 was at 23,995.35 down by 1.27%

Today’s trading brought a chilling surprise for investors as the NSE Nifty 50 plummeted a staggering 1.27%, closing below the crucial 24,000 mark at 23,995.35. Why is the market reacting this way? The decline follows a troubling pattern of sustained selling from foreign investors and disappointing earnings reports for the September quarter.

As October drew to a close, local equities faced mounting pressure amid geopolitical tensions and overvaluation concerns. The foreign institutional investors (FIIs) withdrew over ₹95,000 crore from Indian markets, leaving domestic investors to counteract with net purchases exceeding ₹1 lakh crore. But will this be enough to stabilize the situation?

On November 4, the Nifty experienced a disheartening start to the week, with bears tightening their grip and dragging the index below its August lows during intraday trading. Investor sentiment remains cautious as significant events loom on the horizon—the US elections and the Federal Reserve’s policy meeting. Analysts speculate on a 25 basis point rate cut from the Fed on November 7, but the real question is: will Fed Chair Jerome Powell hint at potential pauses in the rate-cutting cycle amidst a backdrop of robust economic data?

Despite opening on a flat note, the Nifty nosedived in the first half of the session before a slight recovery. Ultimately, it succumbed to a 309-point drop. The backdrop? A tightening landscape influenced by the Fed’s anticipated decisions, where US economic fundamentals—growth, inflation, and monetary policy—will play pivotal roles in shaping market trends.

The BSE Sensex followed suit, shedding over 900 points, marking one of the worst sessions in a month. Volatility surged, driven by investor anxiety regarding the upcoming US presidential election, which has ratcheted up concerns over potential economic impacts.

What’s fueling this downward spiral? Four critical factors are at play:

1. Nervousness Ahead of the US Election: The uncertainty surrounding the U.S. presidential election on November 5 is unnerving investors. With candidates Kamala Harris and Donald Trump in a neck-and-neck race, the implications for India’s economy hang in the balance. Will a Harris win encourage the RBI to ease domestic rates, or will a Trump victory lead to sustained higher U.S. interest rates?
2. Fed Meeting Outcome: The upcoming U.S. Federal Reserve meeting on November 7 looms large. A potential rate cut could attract foreign investments, but without clarity on the Fed’s position, market participants are likely to remain apprehensive.
3. Disappointing Q2 Earnings: The market sentiment has been shaken by lackluster quarterly earnings from Indian corporates, leading FIIs to offload stocks. With Nifty EPS growth projected to dip below 10% in FY25, current valuations may prove unsustainable.
4. Rising Oil Prices: Oil prices soared over 2% as OPEC+ decided to maintain output cuts amid falling prices and weak demand, further complicating the economic landscape. As Brent crude hovers around $74.91 per barrel, what will this mean for inflation and economic growth?

In summary, today’s trading session marked a significant downturn, with the market capitalisation of all listed companies on the BSE plummeting by ₹6.08 lakh crore, closing at ₹442.02 lakh crore. With Indian markets now underperforming their global peers, the combination of geopolitical uncertainties, disappointing earnings, and fluctuating oil prices has ignited a wave of volatility.

Will the markets find their footing, or is further turmoil on the horizon? Only time will tell as we navigate through this storm of uncertainty. Stay tuned!

Bank Nifty: Down by 0.89%

In an unsettling start to the trading day, the Bank Nifty opened in the red, experiencing a drop of 0.89% and closing at 51,215.25. The market sentiment took a hit as investors reacted to the broader trends affecting the financial sector. Adding to the tension, the BSE Sensex also faltered, declining by 1.18% to settle at a low of 78,782.24.

Today, the sectorial front witnessed no gainers, with all sectors facing downward pressure.

Realty emerged as the top loser, dropping by 2.93%, as key players in this sector experienced notable declines. Among the hardest hit were Brigade Enterprises Ltd., plummeting by -5.48%, and Mahindra Lifespace Developers Ltd., down by -3.90%.

FIIs recorded a buy value of ₹13,786.39 crore but faced heavy selling, with a sale value of ₹18,116.18 crore, resulting in a net value of -₹4,329.79 crore.

DIIs showcased a robust performance with a buy value of ₹12,449.82 crore and a sale value of ₹9,513.74 crore, leading to a net value of ₹2,936.08 crore.

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included Punjab National Bank with a 2.69% increase, AU Bank with a 1.24% increase, State Bank of India with a 1.10% increase, and IndusInd Bank with a 0.09% increase.

On the other hand, the biggest losers in the sector included IDFC First Bank with a 2.22% decline, Axis Bank with a 2.21% decline, Canara Bank with a 1.99% decline, ICICI Bank with a 1.27% decline, and HDFC Bank with a 1.18% decline. These results suggest that some of the banking stocks not performed better for the day.

Gold and Silver Rate (INR) 4th November, 2024

Rock-Steady Rupee: A Beacon of Stability Amid US Election Uncertainty

As the closely contested US presidential election approaches, the Indian rupee is emerging as one of the most resilient currencies among emerging markets, providing a safe haven for traders amidst the looming volatility. With the Reserve Bank of India (RBI) standing ready to defend the currency backed by the world’s fourth-largest foreign exchange reserves, the rupee is well-positioned to weather the storm.

Key Factors Supporting the Rupee:

1. Central Bank Confidence: The RBI’s near-record foreign exchange reserves enable it to maintain a firm grip on the rupee, reducing its vulnerability to election-related fluctuations. Michael Wan, a senior currency analyst at MUFG Bank, highlights that the RBI is actively working to cap foreign exchange volatility, ensuring stability in turbulent times.
2. Limited Exposure to US Policies: Unlike many of its emerging market peers, the rupee is less affected by US tariff policies, thanks to India’s domestically-oriented economy. This inherent resilience positions the rupee favorably against the backdrop of global uncertainties.
3. Strong Macro Fundamentals: India’s macroeconomic stability remains robust, characterized by a manageable current account deficit of just over 1% of GDP and gradually moderating inflation pressures. This stability further bolsters investor confidence in the rupee.

Rising Costs of Hedging: A Sign of Caution

As traders analyze the latest polling data indicating no clear frontrunner in the race between Kamala Harris and Donald Trump, the uncertainty has led to an increase in the cost of hedging against dollar movements, reaching its highest levels since early 2020. This shift underscores the heightened awareness of potential market swings in the wake of the elections.

RBI’s Proactive Stance

RBI Governor Shaktikanta Das has consistently emphasized the significance of building foreign exchange reserves as a protective measure against volatility. He has not hesitated to deploy these reserves to prevent sharp declines in the currency, particularly around the critical ₹84 per dollar threshold.

A Stabilizing Force

As the US election draws near, the Indian rupee’s stability, backed by a proactive central bank and strong economic fundamentals, positions it as a preferred choice for investors seeking refuge from the impending uncertainty. Will the rupee continue to hold its ground in the face of global volatility? Only time will tell, but for now, it stands tall as a pillar of strength amidst the chaos.

Stocks Highlights

Mahindra & Mahindra Ltd. has just shown a remarkable surge, with its share price rising by 2.14% from the previous close of Rs 2,817.65 to a striking Rs 2,878.00. But what lies behind this impressive climb? The company reported an astounding Return on Equity (ROE) of 17.02% for the year ending March 31, 2024, leaving its 5-year average of 11.97% in the dust. This is not just a number—it’s a testament to the company’s robust performance and effective management.

But wait! When we compare the stock’s performance to the Nifty 100, the numbers are even more jaw-dropping. Over the last three years, Mahindra & Mahindra has delivered a staggering return of 219.63%! In contrast, the Nifty 100 has only managed 40.91%. Could this be a sign that Mahindra & Mahindra is on the verge of a major breakthrough?

However, it’s not all sunshine and rainbows. The company allocated 5.42% of its operating revenues towards interest expenses and 7.68% for employee costs in the same fiscal year.

On the other side of the ring is Hero MotoCorp Ltd., which has experienced a dip, with a share price drop of 4.25%, falling from Rs 5,020.50 to Rs 4,807.00. What’s going wrong for Hero? Despite this setback, the company has managed to outperform its 3-year revenue CAGR with an annual growth rate of 11.28%, exceeding the 3-year CAGR of 6.96%.

However, when it comes to returns, Hero MotoCorp delivered an 88.97% return over the past three years, which, while impressive, still falls short of the Nifty Auto’s 108.84% return. Can Hero MotoCorp bounce back from this dip, or is it a sign of deeper issues?

In terms of expenses, Hero spent less than 1% of its operating revenues on interest and 6.54% on employee costs for the year ending March 31, 2024.

Advance Decline Ratio

Today, the advance-decline ratio was 0.31, and the market breadth was negative. The volatility index India Vix increased by 5.01 to settle at 16.70 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 669
Decliners – 2156
52Wk High – 75
52Wk Low – 24
High Band Hitters – 134
Low Band Hitters – 120
200d SMA – 23455
50d SMA – 25077
20d SMA – 24632

Top Gainers and Losers Stocks

The top gainers were M&M (+2.14%), Tech Mahindra (+1.86%), Cipla (+1.57%), SBIN (+1.10%), and Dr. Reddy (+0.82%).

The top losers were Hero MotoCorp (-4.25%), Grasim (-3.96%), Bajaj Auto (-3.46%), Adani Ports (-3.26%), and BPCL (-3.05%).

Top Gainers and Losers Sectors

The top losers sectors were Realty (-2.93%), Oil & Gas (-2.48%), Media (-2.16%), Metal (-1.57%), and Financial Services (-1.20%).

SECTORS – NOTABLE ACTION
REALTY -2.93%
OIL & GAS -2.48%
MEDIA -2.16%

Stocks Ban List

The Securities and Exchange Board of India (SEBI) has not included any stocks on the F&O ban list.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

Daily Pivots

As per the above pivots data, 23600 to 24200 is the Nifty 50 trading range.

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Bears Tighten Their Grip: What’s Next for the Nifty 50? Is the Index Heading for a Breakdown?

This article is only for educational purposes and is not an investment advice.