Stock market crash: As volatility rises amid Lok Sabha elections, indices see deep cuts

Volatility deepened in the stock markets on Thursday with deep cuts in the indices of about 1.5% each. The Sensex plummeted over 1000 points below the 72,500 level and the Nifty fell 345 points, below the 22,000 mark. As the election results come closer, markets are turning more volatile. Experts believe markets are likely to remain choppy until the election results are declared.

Volatility Index surges

The India VIX or volatility index hit a 52-week high, touching 18.2 from a low of 10, which it touched in April. A higher VIX indicates increasing volatility due to uncertainty and investor fear while a lower VIX indicates a stable period and positive investor sentiment. Multiple reasons seem to be weighing on the markets and contributing to the rising uncertainty.

As per PhillipCapital, low voter turnout in the first three phases of voting have hurt market sentiment. Foreign outflows spiked to ₹5076 crore in May, NSDL data revealed. FII selling is being triggered both by high U.S bond yields as well as the outperformance of the Chinese and Hong Kong markets.

"China and Hong Kong markets are cheap with PEs around 10 while India is expensive with double the PE of these markets", VK Vijaykumar of Geojit Financial Services told Business Today.

Nifty closed the day at 21,957 while the Sensex closed at 72,404. Oil and gas and construction companies led the losses. L&T was the biggest laggard on the Nifty index falling over 5%.

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