Why Sensex fell 959 pts, Nifty 302 pts, after Trump's US election victory

BSE Sensex dropped by 1.19 per cent or 958.79 points to 79,419.34, before settling at 79,541.79. Similarly, the NSE Nifty50 tanked 1.24 per cent or 305 points to 24,179.05, before ending at 24,199.35

Indian Stock Market falls: Indian benchmark indices – Sensex and Nifty – dropped in trade on Thursday, November 7, 2024 despite Republican Donald Trump' s victory in the United States Presidential Election 2024.

 

The BSE Sensex dropped by up to 1.19 per cent or 958.79 points to 79,419.34, before settling at 79,541.79. Similarly, the NSE Nifty50 tanked 1.24 per cent or 305 points to 24,179.05, and finally settled at 24,199.35.

 

Broader markets also felt the heat. BSE SmallCap index fell up to 288.10 points or 0.51 per cent to an intraday low of 55,720.03 levels. On the other hand, the BSE MidCap index slipped 353.59 or 0.75 per cent to 46,590.43 levels. 

 

 

"With the Republicans also retaining control of the Senate there is a clear red wave on Capitol Hill. A trump sweep will ensure that macro volatility will remain elevated for the foreseeable future," said Prashant Tandon, executive director, investment advisory, Waterfield Advisors. 

 

Given this, here are the top reasons behind the stock market’s fall:

 

Dollar strengthening

 

The US Treasury yields surged amid concerns of higher deficits, driving the dollar to its biggest one-day gain in over two years against major currencies on Wednesday. This dollar strength caused a drop in commodity prices, with gold falling more than 3 per cent to a three-week low as investors moved into US assets following Donald Trump’s election victory.

 

“The Trump factor is likely to drive further selling in Asian markets, as his protectionism stance of policy favours the dollar. A stronger dollar means more investment flow toward US equities over commodities. With this trend, we’re likely to see funds moving from emerging markets (EMs) to US equities,” said G Chokkalingam, founder of Equinomics Research.

 

Potential BOJ rate hike

 

According to Reuters, on November 6, minutes from the Bank of Japan’s (BOJ) September meeting revealed that many BOJ policymakers believe the economy is making progress toward conditions suitable for an interest rate hike. However, the central bank opted to hold off until global market uncertainties ease.

 

“The Indian market decline can also be attributed to Japan's central bank minutes hinting at a potential rate hike, which could further intensify Yen carry trade,” said Ambreesh Baliga.

 

A carry trade is a type of foreign exchange trade in which you borrow money in one currency at a lower interest, and use it to make high-interest investments in another currency.

 

Weakness in IT, Metals, and Pharma

 

Following Trump’s victory, sectors such as IT, Metals, and pharma witnessed a drop. Nifty IT slipped 1.64 per cent to an intraday low of 41,348.75 while Metal slipped 2.29 per cent to an intraday low of 9,435.10 and Pharma tanked 1.71 per cent to an intraday low of 22,527.50 levels.

 

“For the IT sector, while demand may grow, there’s uncertainty about meeting that demand due to increasing US visa issues,” explained Ambreesh Baliga, an independent analyst. 

 

In pharma, Trump’s focus on 'Make in America' could impact Indian pharmaceutical companies, and there are expectations of stricter USFDA regulations which may further hurt Indian pharma companies, he added. 

 

Baliga also pointed out that with Trump in office, we may see higher tariffs on China, which would negatively affect China’s economy, despite its recent stimulus efforts. Since India relies heavily on China for steel, this could be unfavourable for Indian metal companies as well.

 

Continued selling by Foreign Institutional Investors (FIIs)

 

Foreign investors have continued to sell heavily in November, following a record Rs 1 lakh crore worth of equity sales in October. So far, FIIs have sold Rs 11,556.72 crore of equities this month.

 

Weak Q2 earnings

 

The September quarter earnings for FY2024-25 have been lacklustre. Corporate revenue and earnings growth remained sluggish, reflecting a challenging demand environment. 

 

According to Business Standard’s sample of early reports, the net profit of 167 firms grew just 5 per cent year-over-year, in contrast to the 16 per cent Y-o-Y growth seen in the same period last year. The combined net earnings for Q2FY25 stood at Rs 90,685 crore, only slightly above Q1FY25’s Rs 87,569 crore and Rs 86,388 crore a year earlier. READ MORE

 

Technicals

 

Lastly, Futures and Options (F&O) expiry may have contributed to the fall in the Indian equities as the expiry date of F&O contracts has major effects on the stock prices and the entire stock market. 

 

From a technical perspective, Sameet Chavan, head research, technical and derivative at Angel One believes that the recent price action signifies an initial sign of trend reversal. However, one must refrain from being carried away as a decisive breakout above 24,500 is yet to happen, which may further propel the index towards 24,700-24,800 in the comparable period.