Trump euphoria in stock market vanishes; Nifty and Sensex in the red

The Indian stock market ended today's session in deep red as the optimism from the 'Trump trade' rally following d Mr Trump's significant victory in the US presidential election on Wednesday, failed to sustain its momentum in today's session.

Indian benchmark indices wiped out all the gains from the previous trading session. The Nifty 50 closed today’s session down by 1.16%, at 24,199 points, while the Sensex ended 1.03% lower, closing at 79,550 points compared to the previous close.

Broader markets also weighed as the Nifty Midcap 100 and the Nifty Smallcap 100 indices ended the trade with a drop of 0.49% and 0.84% respectively. 

On the Nifty 50, except for Apollo Hospitals and Tata Steel, all other constituents of the index were trading in the red. Hindalco Industries, Adani Enterprises, Grasim Industries, Bajaj Finserv, and Ultratech Cement were the top Nifty 50 losers.

Today’s weakness in the Indian stock market comes after two days of strong gains amid euphoria over Donald Trump winning the election. Investors will now focus on the US Federal Reserve’s upcoming monetary policy and interest rate decision.

The key factors 

Here are the key reasons why the Indian stock market declined today: 

Profit booking: Investors resorted to profit booking in the market after witnessing a sharp pullback rally in the previous two sessions. The Nifty 50 index rallied over 2% in two days supported by across-the-board gains.

However, analysts believe the undertone of the market still remains weak, while they suggest a ‘sell on rise’ strategy.

Trump policies: Analysts are of the view that Donald Trump’s victory is turning out to be more potentially transformative than thought earlier. “These decisions may turn out to be both good and bad. His pro-business initiative of ‘America First’ can strengthen the American economy. But if he walks his talk and imposes a 60% tariff on Chinese imports and a 10% to 20% tariff on imports from other countries, that would trigger inflation and jeopardise the Fed’s policy of containing inflation, necessitating a rethink of the Fed’s present policy of rate cut. This has the potential to negatively impact global stock markets,” said V K Vijayakumar of Geojit Financial Services.

Interest rate cut: Mr Trump’s inflationary policies are anticipated to slow the pace of interest rate cuts by the US Federal Reserve, with potential repercussions for India’s monetary policy.

Central bankers globally are assessing the potential impacts of Donald Trump's return to the U.S. presidency, which poses two primary risks: slower global economic growth and faster domestic inflation, limiting the Federal Reserve's ability to lower interest rates. This could strengthen the dollar and reduce flexibility for developing nations to adjust their monetary policies.

FII selling:  The sustained outflow of foreign funds is also weighing on the Indian stock market. The Foreign Institutional Investors (FII) have sold Indian equities worth over ₹11,500 crore so far in November. This comes on top of FII outflow worth ₹1.14 lakh crore in October, according to data from stock exchanges.

On Wednesday, FIIs net sold Indian shares worth ₹4,445.59 crore, while Domestic Institutional Investors (DIIs) net purchased shares to the tune of ₹4,889.33 crore, as per provisional data available on the exchanges.

(By arrangement with livemint.com)