Monday Mayhem: Sensex nosedives 1,275 points, Nifty sinks below 23,900; key factors behind market-wide sell-off

Indian equities in a choppy trade in Monday's session (November 4, 2024) saw sharp losses led by drag in heavyweights. At around 11:27 am, the 30-share BSE Sensex traded with a gap-down of 1.6 per cent or 1,273.84 at 78,450.28, while the Nifty 50 index also slumped 1.68 per cent or 409 points to 23,895.25.

Here are the key reasons for the steep correction today:

Decelerating earnings growth

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, "The Indian market is facing headwinds from decelerating earnings growth. Nifty EPS growth as indicated by Q2 results may dip below 10 per cent in FY25 which will render the present valuations of about 24 times estimated FY25 earnings difficult to sustain".

Importantly, of the 50 Nifty companies, 34 have reported muted profit growth during the July-September quarter.

US Presidential elections 

The market sentiment has also turned cautious ahead of the US elections on November 5. Prashanth Tapse, Senior VP (Research), Mehta Equities believes the US polls indicate a tight race between Donald Trump and Kamala Harris. Election results, expected by November 8th, could impact global markets, especially if counting is delayed. Investors remain cautious, with concerns about rising inflation and deficits under both the candidates, added Tapse.

Upcoming Federal Reserve meeting

The upcoming US Federal Reserve's meeting scheduled on November 7 is also arousing anxiety on the Street even as analysts largely forecast a rate cut. Nevertheless, some even expect the Fed to hold steady on key policy rates.

Notably, the Fed slashed interest rates for the first time in four years in September by resorting to an aggressive 50-basis points rate cut.

Nifty technicals

Anand James, Chief Market Strategist, Geojit Financial Service said, "Even though 24150 stepped in multiple times last week to avoid collapse attempts, the swings higher thereof clearly lacked momentum. This is because, the 24470-540 region that kept a lid on upsides last week, has 24660-770 obstacles in close proximity."

James added while we expect these levels to be challenged this week, broader trend now requires multiple days of close above 25100 in order to fully abandon the sell-on-rallies approach that continues to be the dominant theme.

Alternatively, inability to float above 24470 or a direct fall back below 24150, will expose 23900-23300, he noted.