Markets Volatile Amid Election Uncertainty
High volatility and diminished investor confidence were evident in the market, with the India VIX Index, considered a ‘fear gauge’ surging over 26 per cent in a single week
The Indian benchmark indices, which faced fluctuations during the first half of the last fortnight, were notably dragged down in the second half due to heightened volatility amid the ongoing Lok Sabha elections, low voter turnout, and uncertainties about the outcome. Due to waning investor confidence, the benchmarks BSE Sensex and Nifty 50 concluded the fortnight with losses of 1.45 per cent and 1.63 per cent, respectively. Meanwhile, the broader indices also mirrored a similar trend.
The BSE Mid-Cap index registered declines of 1.35 per cent, while significant selling pressure was observed in Small-Cap stocks, leading to the BSE Small-Cap index plunging by 3.90 per cent, marking it as the worst-performing index of the fortnight period. On the sectoral front, most of the sectoral indices were in the red, with the exception of the automotive and FMCG sectors. The automotive industry displayed notable optimism, driven by several leading companies launching new vehicles and a significant rise in vehicle registrations, which surged by 27 per cent year-on-year to 2.2 million units in April.
For the FMCG sector, analysts suggested a rural-led recovery in the second half of FY25. Additionally, the prospect of ample rainfall is a welcome relief for farmers, companies, and consumers alike, who have been contending with erratic rainfall and food inflation over the past few years. Domestic information technology stocks mirrored the weakness in global IT equities after the Federal Reserve left benchmark interest rates unchanged, stating that inflation is falling more slowly than expected and will keep the central bank on hold for an extended period.
Considering the Q4 results, more than 70 per cent of the companies that have released their results thus far have shown positive growth. The sectors of banks and financial services are firing on all cylinders, with no bank reporting negative income growth. In other developments, India’s Goods and Services Tax (GST) collection reached a record ₹2.10 lakh crore in April, reflecting robust economic growth. According to data from the Ministry of Statistics and Programme Implementation, India’s Industrial Production (IIP) growth rate slowed to 4.9 per cent in March, down from 5.7 per cent in February
In the past two weeks, foreign institutional investors (FIIs) turned into net sellers, while domestic institutional investors (DIIs) continued to be net buyers. FIIs recorded a significant net outflow of ₹23,734 crore, contrasting with DIIs, who supported the market with a sizeable net inflow of ₹21,531 crore during the same period.
