InvestorQ : What was the reason for the market crash on 28-October and how do you see the stock markets on 29-November, Friday?
shrinidhi Rajan made post

What was the reason for the market crash on 28-October and how do you see the stock markets on 29-November, Friday?

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diksha shah answered.
2 months ago
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It was the expiry volatility of F&O that led to the sharp fall in the market on Thursday. On 28-October the Nifty closed below the 17,900 mark and the Sensex also closed below the psychological 60,000 mark. These levels have been maintained for close to a month now and these levels have been broker after a long gap. The VIX was up sharply by 6.5%.

The fundamental triggers were two fold. Firstly, RBI announced liquidity tightening in the market via Rs.50,000 crore of variable rate repos or VRRs. This created panic in markets. At the same time, Morgan Stanley downgraded India from overweight to equal-weight. Morgan is now the third FPI to downgrade India after UBS and Nomura.

FII selling was again relentless. Foreign investors sold equities worth Rs.3,819 crore on Thursday while domestic funds bought stocks worth Rs.837 crore. FPI selling has been intense on the back of downgrades. Meanwhile, US markets bounced with Dow bouncing 70 bps and NASDAQ bouncing 140 bps on Thursday. SGX is around 30 bps higher in early trade.

I suppose you mean 29-October not November. Expect a dead cat bounce in early trades but would be hard to sustain as traders would be cautious about weekend open positions and there will be a rush to cover up. I am expecting bouts of selling in the second half, especially with the RBI also talking quite hawkish of late.

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