Domestic Markets Rock And Roll

The Nifty VIX, referred to as the ‘fear gauge’, plunged over 30 per cent in the last week, indicating a significant slowdown in volatility and increased investor optimism 

Over the past fortnight, Indian headline indices experienced significant volatility. The first week saw a continuous decline mainly due to uncertainties surrounding the Lok Sabha election outcome, while the second week was marked by a roller-coaster ride of market fluctuations. On the day of the election results, the benchmark indices plummeted over 8 per cent to reach an intraday low, marking the steepest decline in more than four years. This drastic drop followed a significant disparity between the actual results and the predictions from exit polls.

The Nifty PSE index, which tracks public sector enterprises, slumped more than 19 per cent as PSUs bore the brunt of the damage. The panic moment was triggered by vote counts suggesting that the ruling government might depend on alliance partners to secure a third term. Financial services, power, metal and oil and gas stocks were hit hardest as panicked investors liquidated their positions. The fast-moving consumer goods and healthcare sectors, traditionally seen as defensive, once again protected investors’ wealth during the market bloodbath and even delivered notable returns.

Hindustan Unilever Ltd. drew investor attention by surging around 11 per cent in a single week, despite heightened volatility and market fluctuations. Following the assurance of political stability and the benefits of the current government’s continuation, a strong wave of buying sentiment was observed. The Nifty VIX, often referred to as the ‘fear gauge’, plunged over 30 per cent in the last week, indicating a significant slowdown in volatility and increased investor optimism. The market experienced a robust three-day rally, recovering and then soaring to new all-time highs.

The closing rally lifted the BSE Sensex and Nifty 50 index by 1.70 per cent and 1.45 per cent, respectively. The Nifty 50 index surged past the 23,000 level, while the BSE Sensex edged closer to the 77,000 mark. Information technology, real estate and the automotive sectors saw a strong rebound, contributing significantly to the overall market recovery. Broader indices also gained in line with the main indices, reflecting widespread strong investor sentiment.

In the past two weeks, foreign institutional investors (FIIs) have continued to be net sellers, while domestic institutional investors (DIIs) have remained net buyers. FIIs recorded a significant net outflow of ₹21,473 crore, contrasting with DIIs, who supported the market with a sizeable net inflow of ₹20,514 crore during the same period. Looking ahead, the domestic markets will be influenced by a mix of global and domestic factors, with key elements to watch including the US Federal Reserve’s meeting, India’s inflation data, and policy decisions from the BJP-led coalition government.