Stock Market Crash: Why Major Bank Stocks Plummeted Despite Profit Growth, Top Reasons Behind the Fall

Investors faced a severe setback on Dalal Street on the first trading day of the week as the buoyancy witnessed last week largely vanished on Monday. 34 lakh crore rupees within a few hours. Following this massive decline, the total market capitalization of all listed companies on the BSE dropped to 470 lakh crore rupees. At 1:50 PM, the Sensex was trading over 1,000 points lower at the 73,729 level, while the Nifty 50 plunged more than 250 points to slip below the crucial 22,900 mark. The fear in the market was evident as India VIX, which measures volatility, surged over 3 percent to cross 14. A total of 2,474 stocks declined on the NSE, while only 894 stocks managed to stay in the green, and 94 stocks remained unchanged. 7 percent.

Sector-wise, the Nifty Private Bank index fell nearly 2 percent, while the FMCG and Financial Services indices dropped by more than 1 percent. However, amid this widespread sell-off, public sector banks showed resilience, with the Nifty PSU Bank index rallying about 2 percent. bucking the market trend, Adani Ports and Maruti Suzuki gained up to 2 percent, whereas Infosys, Trent, HUL, Bajaj Finserv, NTPC, and Bajaj Finance slumped by up to 2 percent. A mild recovery, however, was witnessed towards the closing hours.

Why Major Bank Stocks Fell Despite Good Quarterly Results

The primary driver behind Monday's market crash was heavy selling in major private sector banks. Axis Bank and HDFC Bank Q2FY27 results fell short of street expectations, triggering aggressive liquidations. Axis Bank reported a 38 percent year-on-year jump in standalone net profit to 7,003 crore rupees. Despite the profit growth, it missed analysts' estimates, causing the stock to tumble over 5 percent and become the top loser on the Sensex. 6 percent rise in net profit to 19,510 crore rupees for the second quarter compared to 18,641 crore rupees in the corresponding quarter last year. Since the market anticipated better figures, HDFC Bank shares dropped over 2 percent. On top of that, ICICI Bank and Yes Bank shares recorded declines of over 1 percent each.

Surging Crude Oil Prices Deepen Concerns

Crude oil remained the second major headache for the markets, while donald Trump decided to exempt Russia's energy sector from stringent sanctions. Consequently, Brent crude futures eased by over 2 percent on Monday, but remained exceptionally high at over 107 dollars per barrel compared to the previous week. WTI crude also traded near 100 dollars per barrel. US Secretary of State Marco Rubio clarified that Trump will take up to 60 days to assess the economic impact of these exemptions. Last week, Brent crude had touched the 110 dollar per barrel mark due to escalating tensions in the Middle East and safety concerns regarding commercial vessels in maritime routes, marking the highest level since May.

Dominant FII Selling and Weak Global Cues

Weak global cues also contributed to Dalal Street's downturn. US markets closed with a heavy sell-off on Friday, where the Nasdaq plummeted over 2 percent and the S&P 500 lost more than 1 percent. 64 percent, and Indonesia's Jakarta Composite crashed over 5 percent. In contrast, South Korea's Kospi gained about 2 percent as investors bought AI stocks at lower valuations. Indian equities are often perceived as an anti-AI alternative in global markets, meaning whenever AI stocks rally globally, Indian markets face downward pressure. Plus, profit-booking and relentless selling by Foreign Institutional Investors worsened market sentiments. The Nifty had rallied over 2 percent across Thursday and Friday sessions. With Tuesday being a market holiday and Monday coinciding with the Nifty weekly expiry, investors initiated profit booking. Although FIIs purchased equities worth 1,166 crore rupees on Friday, they've been heavy net sellers in 9 out of the 11 trading sessions in October so far.

Market Outlook Ahead

K. 8 percent surge in Nifty and solid earnings from banking heavyweights after IT sectors possess the resilience to support the market. However, escalating tensions in the Strait of Hormuz and Brent crude sustaining near 109 dollars will act as major headwinds. He stated that attractive valuations of large-cap stocks and a stronger rupee had slightly improved FII sentiment, but maintaining this trend amidst expensive crude remains difficult, while under such conditions, large-caps are expected to outperform mid-caps and small-caps, with stock-specific actions driven by Q2 earnings this week. Axis Direct Senior Research Analyst Hemang Gor believes that Monday's weekly expiry settlement could keep markets volatile throughout the session, while technically, defending the 23,000 level is vital for the Nifty. For today's trade, immediate support for Nifty lies at 22,950, while stiff resistance is placed higher at 23,300.