November 12 Market Crash: Investors Lose Nearly Rs 3 Lakh Crore

Stock Market Crash

November 12 Market Crash: Investors Lose Nearly ₹3 Lakh Crore as SENSEX, NIFTY Tumble Over 1%

Indian stock markets suffered a severe jolt on Tuesday, with benchmark indices SENSEX and NIFTY both plunging over 1%, wiping out nearly ₹3 lakh crore of investors’ wealth in a single trading day.

The broad-based sell-off was fueled by a combination of domestic and global factors, including inflation concerns, sustained foreign institutional investor (FII) outflows, and a strengthening US dollar, all of which led to widespread pessimism in the markets.

Market Performance: A Sharp Drop Across the Board

The NIFTY50 index, which represents the performance of the top 50 stocks on the National Stock Exchange (NSE), saw a significant drop of 257.85 points, or 1.07%, closing at 23,883.

This marked a fall below the psychologically significant 24,000 level. The decline was driven by widespread selling pressure across most sectors, with 46 NIFTY stocks ending lower and just 4 closing higher by the end of the session.

The market opened in the green, but the early optimism quickly faded as investors engaged in profit-taking, particularly after the NIFTY tested higher levels.

The situation was exacerbated by weak sentiment in global markets, particularly Europe, where shares opened on a negative note, triggering further selling in Indian equities.

By midday, the NIFTY hit an intraday low of 23,839.15, before slightly recovering to end at 23,883.

Similarly, the SENSEX, which tracks the performance of the 30 largest stocks on the Bombay Stock Exchange (BSE), fell by 820.97 points, or 1.03%, to settle at 78,675.18. Of the 30 SENSEX stocks, 25 ended in the red, with only 5 posting gains.

The broad-based losses highlighted the deep-rooted pessimism across various sectors, with all but the real estate sector ending in negative territory.

Key Factors Behind the Market Rout

Several key factors contributed to the market’s poor performance on November 12:

1. Foreign Institutional Investors (FII) Sell-Off
   A major driver of the market’s slump has been the continued selling pressure from Foreign Institutional Investors (FIIs). According to market data, FIIs have been net sellers in Indian equities for several months, with the total outflow in November alone reaching a staggering ₹22,156 crore. In October, FIIs offloaded a record ₹1.14 lakh crore worth of Indian stocks, marking a significant shift in sentiment towards India’s markets. These sustained outflows have added downward pressure on stock prices, contributing to the broader market decline.
2. Rising Inflation in India
   A key domestic factor weighing on investor sentiment was the sharp rise in India’s retail inflation for the month of October 2024, which surged to a one-year high of 6.21%. This was much higher than the market’s expectation of 5.81%. The rise in inflation has raised concerns that the Reserve Bank of India (RBI) may delay any potential interest rate cuts, which had been anticipated to support economic growth. High inflation can also erode purchasing power, dampening domestic consumption and corporate earnings, further exacerbating bearish market sentiment.
3. The US Dollar and Global Factors
   On the global front, a stronger US dollar added to the pressure on emerging market currencies, including the Indian rupee. The Dollar Index surged by 1.8% in November, reaching its highest level since July. On the day of the market rout, the Dollar Index climbed another 0.3% to reach 105.87, which further fueled concerns about capital outflows from emerging markets. The strength of the dollar is often seen as a negative for emerging market assets as it raises the cost of foreign borrowings and makes dollar-denominated assets more attractive to investors, drawing funds away from riskier assets in developing markets like India.
4. Global Economic Concerns
   Additionally, global economic concerns, particularly in Europe and the US, have weighed heavily on investor sentiment. European stocks opened weakly, and the ongoing uncertainties related to geopolitical tensions and inflationary pressures in advanced economies added to the negative outlook for risk assets. The continued global tightening of monetary policy and fears of a global economic slowdown have also dampened investor confidence.

Sectoral Impact: Broad-Based Losses

The heavy sell-off on November 12 impacted almost all sectors, with a few notable exceptions. Realty stocks were the only bright spot, with some stocks in this space managing to post modest gains.

On the other hand, sectors such as PSU banks, metals, automobiles, fast-moving consumer goods (FMCG), and financial services bore the brunt of the sell-off.

1. PSU Banks: Bharat Electronics (BEL) and NTPC, both of which belong to the public sector undertakings (PSU) category, saw sharp declines. BEL fell by 3.49%, while NTPC dropped 3.12%. The selling pressure in these stocks was exacerbated by the broader pullback in government-linked entities.
2. Metals & Auto: Metal stocks were hit hard, with companies like Tata Steel and JSW Steel facing a significant sell-off amid weakening demand for metals globally. The automobile sector, too, faced losses, with Maruti Suzuki and Tata Motors seeing declines due to fears of slowing demand and increasing input costs.
3. FMCG: Asian Paints, one of India’s largest FMCG companies, fell by 2.86% as investors took profits following disappointing earnings results. The stock had been on an upward trajectory for most of the year but faced headwinds from both domestic inflation and rising commodity prices.

Stocks in Focus: Major Winners and Losers

Amid the widespread losses, there were a few individual stock movements that stood out:

1. Britannia Industries was the biggest loser in the NIFTY pack, dropping 7.30% after reporting a 9.4% year-on-year decline in its net profit for the September quarter. While revenue grew by 5.3% to ₹4,667.6 crore, it fell short of analyst expectations, causing a sharp drop in the stock price.
2. Trent emerged as the top gainer in the NIFTY, rising 0.42%. The stock continued its upward trajectory for the second consecutive day after reporting strong earnings and benefiting from growing consumer demand in the retail sector.
3. Sun Pharma, HCL Technologies, and Infosys were other notable gainers, with slight gains of 0.13%, 0.23%, and 0.22%, respectively. These stocks managed to stay resilient despite the broader market downturn, as investors looked to safer, defensive options amid market volatility.

Outlook: Cautious Sentiment Prevails

Looking ahead, the outlook for Indian markets remains uncertain, as investors continue to grapple with a mix of domestic inflationary pressures, foreign selling, and global economic concerns.

The continued outflow of FII funds, coupled with a stronger US dollar, suggests that volatility is likely to persist.

Moreover, rising inflation could further delay the potential for interest rate cuts by the RBI, which would have supported market liquidity.

In the near term, market participants will be closely watching upcoming economic data, corporate earnings, and developments in global markets, all of which will play a crucial role in determining the direction of Indian equities.