Why Indian Stock Market Crashed Despite India-UK Trade Deal
Why Did Stock Market Collapse even with India UK Trade Deal? Here Is What Has Gone Wrong
The second incident was on Friday where there was the significant fall of the Indian stock market- despite the signing of a Free Trade Agreement (FTA) with the United States of America between India and the United Kingdom which is also a historical agreement. The Sensex tanked by 721 points to end at 81,463 and Nifty declined by 225 points to finish at 24,837.
Although this fall came as a shock to most investors especially following such a massive international contract. What then did go wrong? Let us simplify it a bit.
India-UK Trade Deal: It is a Good Initiative, but not a Market Celebration
India and the UK signed a free trade agreement that is historical on Thursday. The transaction will create some opportunities in the areas such as textiles, whisky, and automobiles. Such a transaction would usually build confidence among the investors.
But market experts feel that, in absence of any concrete developments on the issue of India-US trade talks, the market failed to receive the positive impulse that it needed to take-off. Shareholders were expecting good things to happen in the international arena.
Financial Sector Pressure: Bajaj Finance Shocked Investors
The financial sector pressure was one of the greatest causes of the market crash. Although the Bajaj Finance had its quarterly performance, new investors attracted by the prospect of asset quality especially in MSME (Micro, Small, and Medium Enterprises) sector panicked.
The Bajaj Finance stocks went down by 4.73% . This was giving the entire financial services index a down turn; thus dragging the market down further
Uncertainty in India-US Trade Talks
The turnover of the trade negotiations between India and the United States was another significant contributor that damaged the mood of investors. The talks particularly on agriculture and dairy tariffs have ground to a deadlock. The Indian trade delegation went back home empty-handed to Washington and there was a lack of communication on the part of the US side which further enhanced the confusion.
As the deadline of August 1 slissed by and there was no indication of the way ahead, investors begin to worry about the world-wide trade scene.
Foreign Investors continue to sell
Another unfavorable situation experienced is that Foreign Institutional Investors (FIIs) have engaged in a continued selling spree. In four trading days alone FIIs offloaded India shares to the tune of 11,572 crore. This recurrent outflow has dilapidated the short term agenda of the market and brought an extra weight to the indices.
The presence of Weak Global Cues Made the Fire Burn More
Friday fall was also attributed to weak global market trends. The Asian markets are in the red with all Nikkei 225 of Japan, Hang Seng of Hong Kong, ASX 200 of Australia and Shanghai Composite of China recording losses.
Global investors sit in the wait-and-watch mode currently. They are particularly watching major risk events such as Federal Reserve policy meeting, US jobs data and quarterly earnings of large tech concerns such as Apple, Amazon, Meta, and Microsoft.
The Market Performance Today
The BSE Sensex with 30 major companies declined 721.08 points (0.88 percent) to end at 81,463.09, the lowest in a month. It even fell 786.48 points during the day to 81,397.69.
Likewise, the NSE Nifty declined by 225.10 points (0.90per cent) to close at 24,837 which was also its lowest in the past one month. Of the 30 Sensex stocks, just two of them were seen in green with the others in red. Other than Bajaj Finance, Power grid and Infosys also experienced heavy selling.
Conclusion
Although India made a very vital free trade agreement with the UK, the positive news was accompanied by multiple dismal elements. Global weak signals, the financial pressure, FII sellings and the frozen talks between India and US caused the market to slide down.
Shareholders are advised to remain vigilant and monitor the domestic and the international events in the days ahead.
