The Stock Markets Fall Close To 6%

In the broader markets, the BSE MidCap, and SmallCap indices sank up to 12 percent intraday before settling up to 8 percent lower

5 Jun 2024 12:30 AM GMT

On Episode 310 of The Core Report, financial journalist Govindraj Ethiraj talks to Deven Choksey, managing director of DRChoksey FinServ, Dipen Mehta, founder director at Elixir Equities as well as Viktor Katona, lead crude analyst at Vienna based energy intelligence firm Kpler.

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SHOW NOTES

(00:00) Stories Of The Day

(02:36) The stock markets fall close to 6% as BJP is forced into a coalition to govern

(04:49) Why did the markets fall so much and what stocks led the fall?

(12:22) As markets look beyond Modi stocks, what are the new investment themes going forward?

(22:56) Oil prices are still falling, which is good news for India too. What is driving it and how long could it remain low?


NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.

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Markets Fall 6%

The markets were primed and tuned, as we have been reporting in the last few months, for a BJP majority.

That has not happened. As we have also pointed out, the markets were going to express their disappointment even if the BJP or NDA coalition was slightly short of its targets.

Seen from that perspective, it's not that bad, at least the market’s reaction. Because the fact is that the NDA Government will continue at least as things stand at this point.

I hesitate to use words like bloodbath in the context of stock markets but Monday, the 4th of June would qualify as such.

The BSE Sensex index crashed over 6,200 points intraday, before settling 4,390 points, or 5.74 per cent, lower at 72,079 levels.

The Nifty50, meanwhile, broke the 22,000-mark to hit an intraday low of 21,281. The index ended at 21,885, down 1,379 points or 5.93 per cent.

In the broader markets, the BSE MidCap, and SmallCap indices sank up to 12 percent intraday before settling up to 8 percent lower. Which is what most small investors would have seen in their portfolios. But then, stay calm !

Not all stocks were down. Consumer products stock HUL and liquor company United Spirits rose 6 and 5% roughly in a crashing market.

The thinking is that the Government will spend more to keep the electorate happy. Am not sure it will provide subsidised liquor though.

The Brokerages have warned that a derating is in the offing for Dalal Street and that high-flying Modi stocks could face a reality check, the ET reported.

"This was not an election outcome the market valuations were set up for. India valuations have been expensive for ordinary corporate earnings growth/outlook. One of the arguments behind India's rich valuations could have been the political stability/policy certainty that a strong government gave. Some of those assumptions could come under question," global brokerage firm UBS said.

In some ways, then this is very good news, the correction that has set in. Which is always good for markets.

I spoke to two market experts from slightly different points of view.

I first reached out to Deven Choksey, Managing Director of DRChoksey FinServ and began by asking him how he was seeing the outcome of the elections from a stock market point of view which was, as I indicated, primed and projecting an NDA absolute victory.

Even as the NDA returns to power with current prime minister Narendra Modi set to take a third term, the composition of the Government, thanks to allies coming in, is bound to shift.

The changed composition could also mean some changed priorities.

Will Modi stocks still hold forth, what about public sector units, defence and stocks linked to capital investment ?

Much of that would not change but the sentiment driving those prices up obviously has taken a hard knock.

In which case what are the new themes one can or should explore ? After all, markets don’t dwell too long on the past.

I reached out to Dipen Mehta, Founder Director at Elixir Equities and began by asking him what were the new themes he was thinking of ?

Oil Prices Fall Further

Oil futures fell further on Tuesday following OPEC's plan to return barrels to the market earlier than expected, raising concerns that the market will be oversupplied, Bloomberg reported.

Brent fell as much as 2% to around $77 a barrel, compounding losses from the previous day. The OPEC+ alliance is scheduled to start unwinding output cuts as early as October.

Some market watchers had expected OPEC+ to extend cuts through to the end of the year.

I reached out to Viktor Katona, Lead Crude Analyst at Vienna based Energy Intelligence firm Kpler to understand why oil prices were falling and what was his outlook for the coming year.

I caught Viktor at Stockholm airport where he had landed for meetings so the audio might be a little distortive, so apologies for that.

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