Falling for the fourth consecutive session, the Indian stock market suffered significant losses on Thursday, December 19, with benchmark Sensex crashing almost 1,200 points and Nifty nosediving back to 23,870 level in intraday trade after the US Fed signalled the pace of rate cuts could be slower going ahead.
In the last four sessions of losses, the Sensex has come down by 3.5 percent, and the Nifty 50 has declined 3.3 percent.
Sensex opened at 79,029.03 against its previous close of 80,182.20 and dropped 1,162 points to the day's low of 79,020.08. Similarly, Nifty 50 opened at 23,877.15 against its previous close of 24,198.85 and dropped 329 points to 23,870.30.
The market, however, pared some losses. Finally, the Sensex closed 964 points, or 1.20 percent, down at 79,218.05, while the Nifty 50 settled 247 points, or 1.02 percent, lower at 23,951.70.
The midcap and smallcap segments outperformed the large caps. The BSE Midcap index declined 0.30 percent, while the BSE Smallcap index dropped 0.28 percent.
The overall market capitalisation of the BSE-listed firms dropped to nearly ₹450 lakh crore from nearly ₹453 lakh crore in the previous session, causing investors to lose nearly ₹3 lakh crore in a day. Over the last four days of losses, investors have lost ₹9 lakh crore, as the overall market capitalisation of BSE-listed firms stood at ₹459 lakh crore on Friday, December 13.
Sectoral indices today
Most sectoral indices suffered significant losses on Thursday, with the Nifty Bank, Financial Services, IT, and Consumer Durables falling by a percent. On the other hand, bucking the trend, the Nifty Pharma index jumped almost 2 percent.
Let's take a look at five key factors behind the selloff in the Indian stock market today:
1. The US Fed factor: Despite the US Federal Reserve trimming its benchmark interest rate by 25 basis points to 4.25-4.50 percent on December 18—in line with market expectations—its rate cut outlook dampened market sentiment worldwide. The Fed revised its rate reduction outlook, projecting only two more rate cuts of a quarter-percentage point by the end of 2025 as against the market's expectations of three or four rate cuts.
Major Asian markets plummeted following a 3 percent fall in the S&P 500 and Nasdaq, and the US dollar jumped to nearly a two-year high after the US Fed's remarks.
2. Foreign capital outflows: The sustained selling of Indian equities by foreign institutional investors (FIIs) has been a key reason behind the recent downturn in the Indian stock market. FIIs have sold off Indian equities worth over ₹8,000 crore in the last three sessions amid a strengthening dollar, rising bond yields, and the prospects of fewer rate cuts by the US Fed next year.
Foreign capital outflows have been weighing on market sentiment, even as buying by domestic institutional investors (DIIs) cushions the fall in the domestic market.
3. Rupee at record low: The Indian rupee hit a historic low of 85.3 per dollar on Thursday, damaging market sentiment. A weak rupee discourages foreign investors from investing in the Indian market. It reduces their gains when they convert them back into their home currencies, leading to foreign capital outflows and further pressuring the markets.
A weak rupee also means higher inflation, as imported goods and raw materials become costlier. And higher inflation means tighter monetary policies, which is again a negative for the market.
4. Macroeconomic headwinds:
Fresh concerns have emerged over India's deteriorating macroeconomic picture, affecting market sentiment. The country's trade deficit widened to an all-time high in November.
The trade deficit (the amount by which the value of imports exceeds exports) hit a record $37.84 billion, compared with $21.31 billion in November 2023. The overall economic growth is also showing signs of losing steam. India's Q2 GDP prints came to the lowest in nearly two years and showed growth slowing for the third consecutive quarter.
5. Uncertainty over earnings recovery:
After weak Q1 and Q2 earnings of Indian corporates, all eyes are on the December quarter (Q3) earnings. While experts expect earnings recovery, they hint that a decent recovery could be expected only from Q4.
(By arrangement with livemint.com)
