• India's Sensex and Nifty indices fell due to a slump in finance shares and underperformance of Tata Consultancy Services.
• Banking stocks drove the selling spree, but sectors like IT, pharma, and metal registered gains.
• Foreign Institutional Investors shifted focus due to geopolitical challenges, impacting domestic market liquidity.
• The Indian rupee depreciated to an all-time low against the US dollar, influenced by rising oil prices and outflow of foreign money.

On October 11, 2024, India's frontline equity indices, the Sensex and Nifty, experienced a downturn. The Sensex fell by 230 points, or 0.28 per cent, closing at 81,381, while the Nifty dropped 34 points, or 0.14 per cent, ending at 24,964. This decline was primarily attributed to a slump in finance shares and the underperformance of Tata Consultancy Services (TCS), a leading IT stock.

Banking stocks were the main drivers of the selling spree, with the Nifty Bank index dropping 358 points, or 0.70 per cent, to 51,172. The performance of this sector significantly influenced the overall market due to its weight in the indices. However, amidst the overall market downturn, certain sectors managed to register gains. These included IT, pharma, metal, media, energy, infrastructure, commodities, and consumption.

Conversely, sectors such as auto, finance services, real estate, private banks, and services underperformed. In the Sensex pack, companies like HCL Tech, Tech Mahindra, JSW Steel, HUL, Infosys, Titan Company, Wipro, Sun Pharma, L&T, SBI, Bharti Airtel, and Tata Steel emerged as the top gainers. On the other hand, NTPC, Bajaj Finance, UltraTech Cement, Asian Paints, ITC, HDFC Bank, and TCS were the top losers.

Market Dynamics and Investor Sentiment

Market experts attributed the sideways trading pattern to a lack of fresh triggers for decisive momentum. The unexpected rise in the US 10-year yield due to higher core inflation and caution ahead of the US result season added layers of sentiment in the market. The ongoing geopolitical challenges also influenced Foreign Institutional Investors (FIIs) to shift their focus to more affordable markets, impacting domestic market liquidity.

On the same day, FIIs extended their selling, offloading equities worth Rs 4,926 crore. In contrast, domestic institutional investors extended their buying, purchasing equities worth Rs 3,878 crore. This activity by FIIs put pressure on the market, affecting liquidity and sentiment.

The Indian rupee also depreciated to an all-time low against the US dollar, falling below 84 INR per USD. This depreciation was influenced by concerns over rising oil prices due to geopolitical tensions in regions like Ukraine and the Middle East, which are major oil producers. Additionally, the outflow of foreign money from the Indian equity markets added pressure on the rupee.

Global Factors and Historical Similarities

Looking at the global factors, escalating conflicts in the Middle East, particularly involving Israel, Iran, and regional militias, raised concerns about oil prices and global market sentiment. Weak US economic data, including a rise in jobless claims, fueled speculation about the Federal Reserve's potential rate cuts, which had global implications on market expectations.

The market's performance on October 11, 2024, is reminiscent of similar events in the past where geopolitical tensions, economic data, and investor sentiment played crucial roles in shaping market dynamics. For instance, during the 2008 financial crisis, global stock markets, including India's, experienced significant volatility due to a combination of factors such as the collapse of major financial institutions, the bursting of the US housing bubble, and the downturn in the US economy.