STOCK MARKET CRASH TODAY: BSE SENSEX ENDS 733 POINTS DOWN; NIFTY50 GOES BELOW 22,500 - WHY BEARS GROWLED ON D-STREET, CHECK TOP REASONS

Stock market crash today: BSE Sensex and Nifty50, the Indian equity benchmark indices, tanked in trade on Friday, despite a strong opening and the Nifty reaching a new all-time high. Selling pressure from index heavyweights Reliance Industries (RIL) and HDFC Bank led to the crash on Dalal Street. The S&P BSE Sensex dropped by 1,126 points or 1.5% to reach a low of 73,627.99, and the broader Nifty 50 fell by 289 points to touch a low of 22,358.65. All sectoral indices experienced declines in trading.

BSE Sensex closed the day at 73,878.15, down 733 points or 0.98%. Nifty50 ended the day at 22,475.85, down 172 points or 0.76%. The market capitalization of companies listed on the Bombay Stock Exchange also decreased significantly by Rs 4.25 lakh crore when Sensex tanked 1,100 points.

The fear gauge India VIX also increased by 11% to nearly 15, marking its 7th consecutive rise.

"I feel geopolitical tension would make headlines again giving traders an option to go short on markets. Overall, the Q4 earnings are ranging from neutral to positive and are not particularly impressive. There are some reports indicating that Foreign Institutional Investors (FIIs) have decreased their holdings in large-cap stocks such as HDFC Bank and ITC. In the short term, the trend remains cautious, with the focus shifting towards new geopolitical developments. Hence, we advise traders to remain light on positions," said Prashanth Tapse of Mehta Equities.

Why BSE Sensex, Nifty50 crashed today

Here are the key reasons that led to today's bloodbath:

1. RIL and HDFC Banks led the market downfall. The Indian markets lost their morning gains and dropped to the day's low due to the decline in RIL, L&T, HDFC Bank, and Bharti Airtel, among others. These stocks had the most significant impact on the headline indices in terms of their contribution to the respective indices.

2. India VIX, which is a measure of volatility, increased by more than 12% to 15.12 due to various factors affecting market sentiments such as Q4 earnings, the ongoing election season, and the delay in the US Fed's interest rate cut.

Commenting on the day's action, Amit Goel, Co-Founder & Chief Global Strategist, Pace 360 said that the volatility of the Indian stock market has increased in the last few weeks owing to a combination of both global and domestic factors.

"Globally, speculation surrounding the timing and magnitude of the season's first Fed rate cut, along with selling pressure from FIIs in emerging markets, plays a pivotal role. The NFP data from the US expected later today is also a factor in today's volatility," Goel added.

3. In its policy for May, the Federal Reserve recognized that there has been limited advancement towards achieving its inflation target and emphasized the uncertainty surrounding the inflation trajectory. Markets expect US interest rates to stay higher for longer and are pricing in just one rate cut in 2024, said Rajani Sinha, Chief Economist, CareEdge Ratings. The non-farm payroll data from the United States that is anticipated later today is also contributing to the volatility seen today.

4. Higher-for-longer interest rates. The inflation trajectory in the US has delayed the timing and magnitude of the season's first Fed rate cut. Investors are now starting to question if the Fed will be able to implement any rate cuts at all in the year 2024 due to the recent disappointing progress in reducing inflation.

5. Market speculations related to the outcome of the Lok Sabha election results are also causing increased volatility. Analysts predict that volatility may increase even more as we approach the election results date of 4th June.