The Sensex closed 876 points lower and the Nifty 50 shed 257 points on Monday, 19 October. Weak heavyweight bank stocks, high crude oil prices and steady foreign selling all weighed on the market.
Last week gave Dalal Street something to smile about. That mood did not survive Monday. Selling returned in force on 19 October, led by a sharp fall in banking stocks, with rising crude prices adding to the unease.
By 2:30 pm, the BSE Sensex was down about 1,000 points and the NSE Nifty 50 had slipped 295 points. The indices recovered a little before the close at 3:30 pm, when the Sensex was down 876 points and the Nifty 50 was lower by 257 points. Both benchmarks ended a two-session winning streak.
The damage was not limited to big stocks
The fall was broad. The Nifty Midcap 100 and Nifty Smallcap 100 indices also declined, so investors in smaller companies were not spared.
Investors’ wealth took a visible hit. The combined market capitalisation of BSE-listed companies fell from Rs 4,72,62,167 crore at Friday’s close to Rs 4,67,46,191 crore at Monday’s close. That is a loss of a little over Rs 5 lakh crore in a single session.
Why did the market fall on 19 October?
Three factors stood out.
1. Heavyweight private banks dragged the indices down
Private sector banks were the biggest source of pressure, as investors digested their September-quarter earnings. HDFC Bank, ICICI Bank and Axis Bank were the main drags on the Sensex. Between them, the three lenders accounted for more than half of the index’s fall.
The individual stories were different:
- HDFC Bank fell nearly 3 per cent. Investors were also waiting for clarity on the bank’s senior management, including who will replace Deputy Managing Director Kaizad Bharucha.
- Axis Bank came under pressure after its quarterly performance fell short of expectations on some key measures. Its shares dropped about 5 per cent during the session.
- The private banking index fell 1.7 per cent.
This is a reminder of how concentrated index weights are. A few large stocks can pull a benchmark down even when much of the market holds steady.
2. Crude oil stayed high
Brent crude traded at roughly $108 to $109 a barrel on Monday, although it had eased slightly from its recent highs. The surge in oil prices has been linked to supply concerns and tension around the Strait of Hormuz, a key route for global energy shipments. Reports of attacks on tankers there have added to the worry.
India imports a large share of the oil it uses, so costly crude matters in several ways:
- it raises the import bill,
- it puts pressure on the rupee,
- it adds to inflation risks,
- it can squeeze the profits of companies that depend heavily on fuel and petroleum products.
3. Foreign investors kept selling
Foreign portfolio investors (FPIs) have been steady sellers. According to the latest data cited in Monday’s reports, they had pulled about Rs 52,100 crore out of Indian equities in October, making it one of the heaviest months of outflows this year. That follows net withdrawals of Rs 35,861 crore in September.
Higher crude prices, rising US bond yields and a stronger dollar have made global investors more cautious about emerging markets, India included. Heavy foreign selling can weigh on share prices and sentiment, and it can add pressure on the rupee when it coincides with a larger import bill.
What should investors watch next?
According to Professor Abhinav Tripathi, a senior economic expert, the market’s near-term direction will depend on three things: corporate earnings, crude oil prices and foreign fund flows.
Those three factors are linked to the three drivers above. Quarterly results will show whether the pressure on banks is temporary. Oil prices will depend heavily on events around Hormuz. And foreign flows will respond to oil, US yields and the dollar. Monday’s fall suggests investors are still wary, despite last week’s recovery.
This article is for information only and is not investment advice. Readers should consult a qualified financial adviser before making investment decisions.
FAQ
How much did the Sensex and Nifty fall on 19 October?
The Sensex closed 876 points lower and the Nifty 50 closed 257 points lower. Earlier in the session, at 2:30 pm, the Sensex was down about 1,000 points and the Nifty about 295 points.
How much wealth did investors lose?
The combined market capitalisation of BSE-listed companies fell from Rs 4,72,62,167 crore to Rs 4,67,46,191 crore, a loss of a little over Rs 5 lakh crore.
Which stocks pulled the market down?
HDFC Bank, ICICI Bank and Axis Bank. Together they accounted for more than half of the Sensex’s decline.
Why do high crude oil prices hurt India?
India imports a large share of its oil, so higher prices raise the import bill, pressure the rupee and add to inflation risks.
How much have foreign investors sold in October?
About Rs 52,100 crore of Indian equities up to the latest data cited on Monday, after Rs 35,861 crore of net selling in September.
