The month of October is proving disastrous for Indian stock markets, with both Sensex and Nifty experiencing their worst declines since the COVID-19 market crash. Foreign institutional investors (FIIs) have pulled out a massive Rs 82,000 crore from Indian markets, causing a ripple effect that has pushed Sensex down by 5.66%, surpassing the previous lows seen in June 2022. This large-scale withdrawal marks October as the most challenging month for Dalal Street since the pandemic-induced crash of 2020.
According to BSE data, the current fall in Sensex is even worse than the 4.58% decline in June 2022. During the early months of the COVID pandemic, the index fell by 6% in February and a staggering 23% in March 2020. Now, in October 2024, the broader market has lost over Rs 29 lakh crore in market capitalization, as noted in a report by Economic Times.
One of the key reasons behind this significant downturn is the sustained selling by FIIs, which has reached its highest level in a single month, even exceeding the selling during the pandemic period. This is being referred to as a “Sell India, Buy China” strategy, where investors are withdrawing from Indian equities to possibly place bets on a recovery in China.
In addition to the FII outflow, major IPOs, including Hyundai India’s, and Qualified Institutional Placements (QIPs) have strained market liquidity. The high valuations of Indian stocks have only added fuel to the fire, intensifying the market correction.
While market analysts, such as Dr. VK Vijayakumar of Geojit Financial Services, note that a complete market crash is unlikely due to strong domestic liquidity, a significant correction is already underway. Investors are also treading cautiously due to geopolitical tensions and uncertainties surrounding the upcoming U.S. election, further contributing to the bearish sentiment.
As October draws to a close, it stands out as one of the most volatile and damaging months for D-Street since the global pandemic’s market disruptions.
