Nifty slips below key 19,000 level: 5 factors propelling a free fall

Domestic equity benchmarks continued to nosedive for the sixth straight session on Thursday (October 26, 2023) as traders turned cautious ahead of the expiry of monthly derivative contracts due at the end of the session. The Nifty50 plunged as much as 273 points or 1.4 per cent to 18,849.2, sinking below the psychologically important 19,000 level for the first time since June 28, while the leaner Sensex index slumped 929.9 points or 1.5 per cent to 63,119.2. 

At around 1:15 pm, the 30-share BSE Sensex was down 859.7 points or 1.3 per cent at 63,189.3 while the Nifty was down 261.7 points or 1.4 per cent at 18,861.9. The high beta Nifty Bank index also faced selling pressure, down 1.6 per cent at 42,166.

Here are some of the key reasons behind the free fall in the market:

Middle East crisis

The ongoing Israel-Hamas conflict can pull the global economy into recession and depress the stock market by 20 per cent, economists at Ernst & Young warned.

"There is risk-off in global equity markets triggered by a combination of economics and geopolitics. The Israel-Hamas conflict continues to be a major headwind for markets. If the conflict lingers for long, it has the potential to impact global growth, too, when the global economy is already in the midst of a slowdown," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Hardening of the US bond yield 

At the time of publishing this report, the US 10-year bond yield traded at 4.969 per cent. On Monday (October 23), the benchmark breached the key 5 per cent level for the first time since the global financial crisis. The surge in the yield impacts the capital flow into emerging markets like India negatively.

"In the near term, however, the strongest headwind for the market is the stubbornly high US bond yields. With the 10-year bond yield at a near 5 per cent FPIs are likely to be in the sell mode," Vijayakumar added.

Global markets

Asian markets traded in the red following a weak overnight session in the US, with South Korea’s Kospi and Japan’s Nikkei indices trading with over 2 per cent losses.

Fresh FII offloading

In the previous trading session, FIIs net sold Indian equities worth Rs 4,236.6 crore as per the provisional data. Persistent selling by foreign institutional investors (FIIs) is weighing on Indian equities.

Oil price impact

Global oil benchmark Brent crude declined 0.29 per cent to $89.9 a barrel. Higher oil prices are a negative for countries importing the commodity, like India.

With inputs from agencies