Stock market crash before Lok Sabha Election Result: Why Sensex fell 1200 points in three days? Explained with 5 reasons

Stock market crash: Ahead of the Lok Sabha Election 2024 results, the Indian stock market has turned highly volatile as today’s India VIX index touched an intraday high of 24.52, logging a nearly 90 percent rise in one month. As the Indian voters are gearing up for the seventh and last phase of Lok Sabha Elections 2024 on Saturday this week, exit polls are expected to flood on Saturday evening. However, ahead of the Lok Sabha Election results and exit polls, the Indian stock market continued to trade weak for the fifth straight session. The BSE Sensex today opened with a downside gap and touched an intraday low of 74,133, logging over 1200 points loss in three consecutive sessions.

According to stock market experts, uncertainty before Lok Sabha Election results, rising US Treasury Yield, tension in the Middle East, monthly expiry, and dent to US Fed rate cut hopes.

Why stock market is falling today?

1] Uncertainty over Lok Sabha Election outcome: Speaking on the reason for the fall in the frontline Indian indices, Avinash Gorakshkar, Head of Research at Profitmart Securities, said, “Rising India VIX today is an indication that the market is expected to remain highly volatile till Lok Sabha Election results are out. After six phases of Lok Sabha Elections, the market is still unconvinced about the kind of government formed after the Lok Sabha Polls. That’s why the Indian stock market is falling for the five straight sessions.”

2] Rising US Treasury Yield: “The better than expected consumer confidence data along with hawkish commentaries from US Fed officials led to a surge in US treasury yields to one-month high,” said Siddhartha Khemka, Head of Retail Research at Motilal Oswal adding, “Though FII selling intensity has reduced, the caution is increasing as we near the big event outcome which is resulting in profit booking.”

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3] Tension in the Middle East: “Global equities traded lower on Wednesday as higher bond yields and a surge in oil prices due to heightened tensions in the Middle East (a fresh attack on the ship in the Red Sea) stoked concerns that interest rates will likely stay higher for longer,” said Deepak Jasani, Head of Retail Research at HDFC Securities.

4] Monthly expiry: “Frontline indices are falling today because of the monthly expiry. The roll-over rate is slow in early morning deals, which is also a reason for the dip in the Sensex, Nifty and other major Indian indices. However, the roll-over rate is expected to pick up in the second half, and we might see some recovery in the second half,” said Avinash Gorakshkar of Profitmart Securities.

5] Dent to US Fed rate cut hopes: “Soaring crude oil prices and rising tension in the Middle East is expected to put pressure on the US inflation, which got reflected in the hawkish talks by the US Fed officials. So, in the wake of the high interest rate regime, the US dollar and the US Treasury or bond market are expected to attract more investments compared to other assets like gold, equity, mutual funds, etc. This fall in the Indian stock market should also be seen from this angle,” said Gorakshkar.

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