Stock market may be falling because of these 4 big reasons. Lok Sabha Elections to blame?

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Stock market today: The Indian stock market has been witnessing volatility in recent sessions. The India VIX index- a measure of volatility in the Indian stock market- surged nearly 35 per cent in just four sessions in May. It saw a small rise of 0.30 per cent in April and a 18 per cent fall in March. Sensex and Nifty fell almost a per cent each after opening higher today (May 7). BSE Midcap index declined over 2 per cent while BSE Smallcap index fell 2 per cent as the India VIX jumped nearly 6 per cent to 17.6 level.



Stock market today: BJP supporters during a public meeting of Prime Minister Narendra Modi for Lok Sabha elections, in Dhar, Madhya Pradesh.(PTI)

Why stock markets are volatile: Major reasons why

FIIs selling:  Strong selloff by foreign institutional investors (FIIs) could be a reason for the recent volatility in the Indian stock market as in the last three trading sessions, FIIs sold off Indian equities worth 982 crore, as per NSDL data.

Lok Sabha elections effect: Amid Lok Sabha elections, the relatively low turnout is likely to have resulted in jitters among retail investors as V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “Perhaps the more significant factor might be the apprehensions emanating from the unexpectedly low turnout in the elections so far. One view is that the definite and smooth victory of the ruling dispensation is a bit uncertain now. The market, which has already discounted a BJP/NDA victory, is a bit unsure now. Perhaps this can be the reason for the apprehension in the market and the bulls shedding their aggressive stance.”

Premium valuation: Stock market is at a premium valuation against its historical average. Motilal Oswal Financial Services noted that Nifty 50 is trading at a 12-month forward P/E of 19.3 times while Kotak Institutional Equities said that the Indian market continues to trade at expensive levels.

Q4 earnings: Q4 earnings of several companies has been released and Kotak said that owing to no positive surprise, the stock market could be volatile. It said, “A few companies have delivered negative surprises. Consumption and outsourcing continue to be weak, while financials continue to exhibit strength. Limited upgrades in earnings are in sharp contrast to elevated market expectations and rich valuations.”

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Pooja Gupta

CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

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CA Pooja Gupta (CA, ISA, M.com) having 15 years of experience. Educator and Digital Creator

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