Stock Market Crash: Why Sensex Dropped 1,366 Pts And Nifty Plunged 338 Pts On May 9? Next Target Prediction

Indian stock market crashed during the trading session of Friday, as tensions on borders intensified severely. Panic selling erupted in financial, banking, and realty stocks after Pakistan retaliated with drone and missile attacks on cities like regions of Punjab, Jammu, Rajasthan, and more. Cities in these regions are under blackout. Although India retaliated back effectively, however, investors' sentiment has turned from bearish to cautious.

Key reasons why market are down in India is due to mixed global cues, weakening in rupee, strong dollar and a spike in crude oil prices. Also, compared to midcaps and small-caps, the large-cap stocks faced a steep downside, dragging the market significantly.

With the US-UK trade deal, along with potential US-China talks to minimise tariff impact, investors are looking for a similar action between India and the US. Experts have directed investors to not panic. However, Sensex and Nifty are expected to face the short-term heat of the war.

Sensex, Nifty:

During the closing bell, Sensex and Nifty have declined by more than 1.1% each. Sensex dropped by at least 1,366.47 points to hit an intraday low of 78,968.34. While Nifty 50 touched its day's low of 23,935.75, down by over 338 points from the previous session.

1. Heavyweight Stocks Selloff:

Top Sensex stocks witnessed heavy selling pressure. ICICI Bank, Power Grid, Ultratech Cement, Adani Ports, Bajaj Finance, and Bajaj Finserv were top losers with the decline of 2% to 3.5%. Also, giants like HDFC Bank, Reliance Industries (RIL), Axis Bank, and ITC also tumbled by 1.5% to 2%, contributing to the downfall.

2. Sectoral Indices:

A mixed trend was witnessed across sectoral indices. However, a steep decline in financial, private banks and realty stocks became the biggest draggers of the market on Friday.

Nifty Financial Services plunged by 2%, while Nifty Realty index nosedived by nearly 3%. Nifty Private Bank shed over 1.3% and Nifty FMCG also joined the bearish wagon with nearly a per cent decline.

Among the gainers was Nifty PSU Bank with an upside of 1.4%.

3. Rupee Weakened:

Experts hinted at cautiousness for the Indian market, as tensions escalated to new heights between India and Pakistan. The Indian rupee weakened sharply to cross a six-month high nearing 86 levels.

Pakistan drove investors to pivot toward assets outside of India. Indian forces struck Pakistani territory in retaliation to terrorist attacks on Indian Kashmir last month, vowing more retaliation from both sides. This risked the relative safety of Indian assets in the region as their growing economy and relatively stable currency triggered a sharp influx of funds into domestic capital markets. Still, the rupee remained higher since the start of the year, as per Trading Economics data.

4. Surge In Crude Oil:

Both US WTI and Brent Crude rose sharply owing to optimism over US-China trade talks after the US-UK trade deal made significant tariff changes.

As per reports, officials of both US and China are expected to meet over this weekend. While trade deals with US comes as a positive factor, the gains in crude oil prices were limited due to output increase decision by OPEC+.

"WTI crude oil futures reached around $60 per barrel on Friday, heading for a weekly gain as optimism around US-China trade talks bolstered hopes of a resolution to trade tensions and stronger global oil demand. The announcement of a US-UK trade agreement also lifted sentiment. Additionally, a larger-than-expected drop in US crude inventories and signs of potential supply correction too provided support. However, concerns remain over rising US economic uncertainty, OPEC+ plans to increase production, and the impact of a potential US-Iran nuclear deal on global oil supply, capping further gains," said, Rahul Kalantri, VP Commodities, Mehta Equities.

5. Sharp Jump In Dollar Amid Mixed Global Cues:

On the hopes of improving global trade sentiments at larger scale, investors tapped to dollar. US dollar index climbed to hit 101 levels against a basket of currencies, moving towards its third consecutive weekly gains. The greenback got a boost from lower expectations of Fed rate cut ahead after chair Jerome Powell said FOMC is in no hurry for easing rates.

Asian market traded on a mixed note on Friday, despite Wall Street ending in gains overnight.

Should Investors Panic In Indian stocks?

Investors should not panic and exit from the market now. Remain invested, monitor the developments and wait for the dust to settle, advised Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Explaining in detail, he said, one, the conflict, so far, has demonstrated India's clear superiority in conventional war fare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan. Two, the market is inherently resilient supported by global and domestic macros.

Also, the domestic macros construct is further rendered stronger by the high GDP growth expected this year and the declining interest rate environment. These are the reasons why FIIs have been on a buying spree in the Indian market during the last sixteen trading sessions, he said.

Next Big Target For Indian Stock Market?

Nifty formed a triangle pattern on the hourly chart and closed below it at 3.30, but the adjusted closing led to a higher close. Additionally, the Nifty has closed decisively below the 40HEMA hinting towards weakness in the short term, said Vikram Kasat, Head - Advisory, PL Capital.

Lastly, he said, Nifty sustaining below 24198 can drag it lower to 23847 in the short term. On the way up, the hourly swing high of 24447 will be an important resistance level in the near term. The reversal level can be trailed to the recent hourly high of 24447.

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