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5 Key Factors Behind Today's Stock Market Crash in India

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Synopsis:

The Indian stock market crashed today, with Sensex falling 2400 points and Nifty losing over 700 points. Factors include US recession fears, BoJ policy changes, geopolitical tensions, weak Q1 earnings, and market overvaluation concerns.

Monday blues seem to have changed color this week, with a red river flowing in the stock market. Investors are believed to have lost around 15 lakh crores collectively today. Both the key Indian indices Sensex and Nifty have declined sharply. The Sensex fell by about 2400 points, while NIfty lost more than 700 points. 

Index

Friday Closing

Monday Closing

Day Low

Sensex

80981

78759

78295

Nifty 50

24717

24055

23893

Bank NIFTY

51250

50092

49719

Here are five major reasons that contributed the most to the market’s crash today.

1. US Recession Fears

The threat of a recession is hanging by a thread in the US, and it has its impact globally. The unemployment rates continue to intimidate the US economy. The job growth numbers for the month of July have come out and they don’t look good. It is possibly the weakest job growth since the previous year, and an economic crisis is feared upon. This naturally triggers sensitive points in the global economy causing economies to face a negative impact.

2. Change in Bank of Japan Policy

The Japanese market has been another influential factor in the instability of the global market. The recent policy changes at the Bank of Japan, after which the Japanese Yen appreciated significantly against the US Dollar, have led to a lot of volatility in the markets. Such adjustments in policy have pushed investor sentiment into the safe zone, with most of them craving safer assets amidst uncertainty. The resultant impact on the global financial markets was deep and hence contributed to the takedown of the Indian stock market.

3. Mounting Geopolitical Tensions

The geopolitical tensions, mostly related to the Middle East, have further added to the instability in the markets. The recent death of Ismail Haniyeh, who was the Prime Minister of the Palestinian National Authority, has escalated tensions in the conflict. The continued clash between Iran and Israel has instigated a feeling of unease amongst the investors. Geopolitical concerns are usually followed by a hike in market volatility due to the fear of disruption in global economic stability among investors. The heightened tensions added another layer of uncertainty, where the investors were seen to get more cautious, leading to a sell-off in the markets.

4. Weak Q1 Earnings

The Q1 earnings season, though in line with expectations, has been uninspiring. Mainstream corporations failed to provide the pleasant surprise needed to boost investor sentiment. Although many firms did report in line, the lack of significant earnings growth failed to enthuse investors. Disappointment in corporate performance led investors to reconsider stock prices, which then became part of the broader market decline.

5. Market Overvaluation Concerns

Another reason for this stock market fall could be the overstretched valuations of the Indian stock market. Valuations in the mid- and small-cap segments have reached such levels that many analysts believe they cannot hold up much longer. This has evoked fears of an overdue correction, which has now manifested. As investors reassess these rich valuations, many have decided to lock in profits. This wave of selling, consequent upon the same, has pulled down the indices.

Conclusion

The blend of these different factors has resulted in one of the biggest market crashes in recent times. The steep declines in Sensex and Nifty reflect deep-rooted global economic concerns and investor caution. With the market going through these turbulent times, it becomes necessary for investors to be updated and cautious about the ongoing developments.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

FirstCry IPO Details 

As investors prepare for the subscription period, here are some key details to consider before participating.

Ola Electric IPO

Details

IPO Open Date 

6th August, 2024

IPO Close Date 

8th August, 2024

Face value

₹2 a piece

Issue Type

Book Built Issue IPO

Price band

₹440 to ₹465 per share

Fresh Issue

35,827,957 shares

Offer for Sale

54,359,733  shares of ₹2 a piece

Allotment date

8th August 2024

Credit in demat accounts

8th August 2024

Initiation of Refunds  

12th August 2024

Listing date

13th August 2024

Listing platforms

Both 

  • Bombay Stock Exchange (BSE) 

  • National Stock Exchange (NSE)

Investing in FirstCry IPO

FirstCry is India’s biggest online and offline store for products for mothers, babies, and kids. A clear analysis of the company can be very helpful in making the right decision about your investments. Listed below are some of the strengths and weaknesses of the company. 

  • Strengths

    • In the financial year 2023, FirstCry made ₹72,576.34 million in sales, which is a big jump from ₹57,994.63 million in FY 2022 and ₹39,858.44 million in FY 2021. The platform’s wide reach and strong community of parents help drive its success.

    • The company’s content-focused approach attracts parents from the very beginning. The robust platform offers practical help to parents in the form of content and data from parents, gynaecologists, doctors, and nutritionists.

    • The high brand loyalty enjoyed by the company encourages traffic to the platform. Capitalizing on its brand strength, FirstCry is also extending into international markets and new areas, which further enhances its visibility and grows its customer base.

    • FirstCry offers a long list of 7,580 global and domestic brands such as Mee-Mee, Chicco, Medela and Funskool. This variety of options variety attracts a diverse customer base not just in India, but also in the UAE, and the KSA.

  • Weaknesses

    • When it comes to operations, the company’s performance in the past might not guarantee future growth or financial results. The uncertainties noticed by the auditors could limit the company’s business flexibility.

    • Several FirstCry subsidiaries have unsecured loans that can be recalled at any time, potentially leading to liquidity problems.

    • The company has experienced negative net cash flows in the past, and future negative cash flows could harm its financial condition.

    • Though the Regulatory and Compliance with  Companies Act 2013, has been resolved, there is no assurance that future non-compliance won't occur.

    • A lack of exclusive agreements with third-party brands can be a potential risk if these brands decide to end their relationship with the company. 

Over To You

FirstCry is a one-stop shop for most new parents. It is a big brand popular across the country. Despite notable asset growth indicating potential expansion and capacity, recent revenue declines and a shift from profitability to significant losses reveal underlying challenges and market pressures. 

The small drop in net worth and reserves suggests lower equity and retained earnings, which could affect financial stability. Also, the big increase in borrowing means higher debt, which might impact financial stability and lead to more interest payments. Fixing these problems will be important for keeping the company stable and supporting future growth.

So, if you are planning to apply for the FirstCry IPO, make sure you are well aware of the company's strengths and weaknesses. Make a well-informed decision after a careful and detailed SWOT analysis.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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