India’s key equity indices opened lower on Monday, driven by losses in banking, financial, and IT stocks, as investors maintained caution ahead of the upcoming U.S. presidential election and a potential interest rate cut by the Federal Reserve. By mid-morning, the BSE Sensex had dropped 1,014 points (1.27%) to 78,710.36, while the Nifty50 index declined by 308 points (1.27%) to 23,997. The market capitalization of all BSE-listed companies fell by Rs 6.8 lakh crore to Rs 441.3 lakh crore. Major contributors to the decline included Reliance Industries, Infosys, ICICI Bank, HDFC Bank, and Sun Pharma, while L&T, Axis Bank, TCS, and Tata Motors also weighed on the Sensex. Sector-wise, indices for Nifty Bank, Auto, Financial Services, IT, Pharma, Metal, Realty, Consumer Durables, and Oil & Gas declined between 0.5% and 1.7%, with market volatility (India VIX) up by 5.2% to 16.73.
Key Reasons for Market Decline
a) Pre-U.S. Election Jitters
With the U.S. presidential election scheduled for November 5, Indian markets are impacted by the uncertain race between Democratic Vice President Kamala Harris and Republican former President Donald Trump. Analysts suggest varying policy impacts based on the election outcome, which could affect Federal Reserve decisions and, in turn, influence the Reserve Bank of India’s rate policy. Investors are adopting a wait-and-see approach due to this uncertainty.
b) Anticipated Fed Rate Cut
The upcoming U.S. Federal Reserve meeting on November 7 is adding to investor caution. Analysts are anticipating a potential rate cut of 0.25%, which could prompt an inflow of foreign investment into India. However, until a decision is confirmed, market sentiment remains wary.
c) Weak Q2 Earnings Performance
Lower-than-expected earnings from Indian companies in the second quarter have also dampened investor sentiment, leading to an exit of foreign institutional investors. Analysts have noted that Nifty EPS growth may dip below 10% for FY25, challenging the current market valuations.
d) Rising Oil Prices
Early trading saw oil prices increase by over $1 after OPEC+ decided to delay a planned December output hike due to weak demand and rising supply. Brent crude reached $74.28 per barrel, with U.S. West Texas Intermediate (WTI) crude at $70.69, adding further pressure on the Indian market.
