Why Sensex fell 800 pts, Nifty tested 22,000 on May 9: Key reasons here

3 min read Last Updated : May 09 2024 | 2:51 PM IST

Indian equity markets fell sharply on Thursday, May 9, amid a widespread selling in index heavyweights, coupled with FII selling, and rising US bond yields.

The benchmark S&P BSE Sensex dropped by as much as 1.14 percent or 842 points to hit an intraday low of 72,624.14, while the Nifty50 dropped 272 points intraday to hit a low of 22,030.95.

Meanwhile, in the broader market, the S&P BSE MidCap shed 1.47 per cent intraday, and the BSE SmallCap lost 1.68 per cent.

That said, VK Vijayakumar, chief investment strategist at Geojit Financial Services views this as an opportunity for long-term investors to consider acquiring high-quality large-cap stocks that have been affected by FII selling.

Here are the three key reasons for Thursday’s sharp fall:

Broad-based selling by index heavyweights

Index heavyweights including Reliance Industries, L&T, HDFC Bank, ICICI Bank and ITC saw broad-based selling due to political uncertainty. These key players collectively accounted for approximately 80 per cent of the index’s decline, exerting considerable downward pressure on the stock markets.

FIIs and FPIs selling

Foreign Institutional Investors (FIIs) have been actively offloading their holdings throughout May, with total sales worth Rs 15,863.14 crore.

On May 8 alone, FIIs divested equities worth Rs 6,669.10 crore. Concurrently, Foreign Portfolio Investors (FPIs) have divested equities worth Rs 13,747 crore thus far in FY25.

This trend of aggressive FII selling, coupled with comparatively subdued buying activity from Domestic Institutional Investors (DIIs), analysts believe, has contributed to market volatility.

“During the last one month, the Nifty is down 1.5 per cent, while the Shanghai Composite is up by 2.62 per cent and Hang Seng is up by a whopping 8.8 per cent. Chinese and Hong Kong markets are cheap with PEs around 10 while India is expensive with double the PE of these markets,” said V K Vijayakumar of Geojit Financial Services.

So long as this outperformance of the Chinese and Hong Kong market will continue, FIIs are likely to sell, he added.

Nervousness around General election outcome
Low voter turnout witnessed in the initial three phases of the elections, analysts opine, have exacerbated markets’ nervousness.

Independent analyst Ambareesh Baliga said that markets are discounting less than 400 seats for the ruling BJP, sensing competition from the I.N.D.I.A bloc. “The selling may intensify should the Nifty50 breach the 22,000-mark decisively,” he added.

First Published: May 09 2024 | 1:56 PM IST

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