Low voter turnout, high VIX! Why stock investors saw Rs 11 lakh crore wealth erosion in 3 days
Synopsis
Stock market reacts to low voter turnout speculation in Lok Sabha election. Nifty falls below 50-DMA, Sensex loses 1,000 points, BSE-listed stocks lose Rs 11 lakh crore in three days. India VIX surges, FIIs sell. Valuation concerns and Q4 earnings disappoint.
The stock market's fear index India VIX has zoomed 66% to fresh 52-week high levels by jumping non-stop for 9 consecutive trading sessions. The ongoing volatility is likely to remain intact until the result of the Lok Sabha election is declared on June 4.
So who's voting the bulls out of Dalal Street?
1) Pre-election nervousness
After the first two phases of voting saw a relatively lower turnout, today's polling saw 40% voter turnout till 1 pm.
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2) Valuation tension
Technical analyst Aditya Arora of Adlytick goes on to say that Nifty can crash anywhere between 1,000 to 4,000 points as the market is overvalued in terms of PE ratio and price-to-book ratio.
3) FII mood
FIIs have sold Indian stocks worth Rs 5,525 crore in the three trading sessions in May so far as US bond yields have turned attractive and the timeline of interest rate cut has been delayed.
The ongoing March quarter season has hardly provided any positive surprises with the overall report card of India Inc being in sync with expectations.
"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," said Sanjeev Prasad of Kotak Institutional Equities.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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