Stock Market Plummets by ₹15 Lakh Crore with Major Decline; Discover the Five Reasons Behind the Drop

The stock market has kicked off the Shravan month with a significant jolt. During the morning session alone, the Sensex fell by 2,600 points and the Nifty dropped by 793 points, leading investors to lose over ₹14.78 lakh crore. 

On the BSE, only 692 shares traded on a positive note, while 3,111 shares saw a decline. Here are five reasons behind this massive shock in the stock market…

Fear of Recession in the U.S.

Weak PMI data and an increase in unemployment in the U.S. have heightened fears of a recession. The Nasdaq and Dow Jones experienced significant declines, and U.S. futures also remained down. 

This has impacted stock markets in Asia, including India. Japan’s Nikkei fell by 9.53%, while the KOSPI dropped by 7.65%.

Geopolitical Crisis

The ongoing conflict between Iran and Israel continues to escalate. Following the assassination of a Hamas leader by Israel in the Middle East, there are reports that Iran and Hamas are preparing retaliatory actions. 

The geopolitical crisis has led to an increase in crude oil prices, which is impacting the economic situation.

Profit Booking

Since the results of the Lok Sabha elections on June 4, there has been a notable surge in the Sensex and Nifty. The Sensex has risen by over 8,000 points, and the Nifty has increased by up to 2,400 points. As a result, investors are booking profits, considering global factors.

Impact of Quarterly Results

According to Motilal Oswal, corporate earnings for the first quarter ending in June have decreased by 2% year-on-year due to weak deals and low demand. 

Out of the Nifty 50 companies, 30 have announced their results, showing a 0.7% increase in revenue but a 9.4% decline in net profit. The overall performance has been affected by global commodity price fluctuations.

Bank of Japan Raises Interest Rates

The possibility of an interest rate cut at the upcoming Federal Reserve meeting in September has diminished due to reports of a recession in the U.S. 

Meanwhile, the Bank of Japan has increased interest rates to combat inflation. Forex traders are concerned about potential losses due to these unexpected rate hikes.

What’s Next?

Prashant Tapase, Senior Vice President at Mehta Equities, has indicated that due to overall weak corporate performance in the June quarter and the technical overbought condition of the stock market, a correction mood will likely persist. 

There has been significant profit booking in sectors like Nifty Auto, Realty, and Metals. Until the global situation stabilizes, small investors may adopt a “wait and watch” approach.