The Sensex and Nifty continued their downward slide for the third consecutive session on Wednesday, as global and domestic factors weighed heavily on investor sentiment. The benchmark indices fell ahead of the US Federal Reserve’s policy announcement later today, with market participants closely watching for hints on future interest rate moves.
The S&P BSE Sensex declined by 467.32 points, or 0.58%, to 80,217.13, while the Nifty shed 135.60 points, or 0.54%, to 24,205.35 as of 12:30 PM. Volatility remained high, with the India VIX fear gauge inching up by 0.20% to 14.52. Investor wealth, as reflected by the total market capitalisation of BSE-listed companies, fell by Rs 1.35 lakh crore to Rs 453.78 lakh crore.
KEY REASONS BEHIND THE FALL
Global pressure ahead of Fed decision – Global markets are on edge ahead of the outcome of the US Federal Reserve’s two-day meeting. While the Fed is widely expected to cut interest rates by 25 basis points, uncertainty looms over its future policy stance. Analysts at Nomura noted that the Fed’s post-meeting commentary is likely to be hawkish, with projections suggesting a slower pace of rate cuts in 2025 and an increase in the long-term median rate to 3%.
Adding to the jitters, the US Dow Jones Industrial Average fell for the ninth straight session on Tuesday, marking its longest losing streak since February 1978. Rising US Treasury yields and continued strength in the US dollar are also dampening market sentiment globally.
Banking stocks plunge – Private banking stocks led the decline as markets tanked on Wednesday. Heavyweights like HDFC Bank, ICICI Bank, and Axis Bank together dragged the Sensex down by over 250 points. Other major losers included Power Grid, which fell 2.23% to Rs 322.65, and Tata Motors, NTPC, and Bharti Airtel, which declined by up to 1.9%.
Record low rupee and FPI outflows – The rupee hit a record low against the US dollar, driven by rising US interest rates and global currency market dynamics. A weaker rupee often triggers foreign portfolio investor (FPI) outflows, and data shows that FPIs sold Indian equities worth Rs 6,409.86 crore on Wednesday alone.
“The external pressure on the rupee is becoming more intense due to high US interest rates, idiosyncratic euro weakness, and tariff risks for the yuan,” HSBC said.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that foreign institutional investors (FIIs) have turned sellers during market rallies, contributing to the downward pressure. He pointed out that the trend of FII buying seen earlier in December was short-lived, as FIIs are now favouring the US market, which has outperformed India.
Despite the weakness in the benchmarks, the broader market has shown resilience. Vijayakumar said that stocks delivering strong quarterly results are being rewarded, and there is less concern about FII selling in this segment.
On a year-to-date basis, the S&P 500 in the US has gained 27.5%, outperforming the Nifty, which has risen only 12%. This divergence in performance is causing concern among investors, with fears that the trend may continue unless Indian economic indicators show a recovery in GDP growth and corporate earnings in the upcoming quarter.
