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The BSE Sensex plunged 1,162.12 points to 79,020.08 in early trade, while the NSE Nifty fell by 328.55 points to 23,870.30.
Market capitalisation eroded by approximately Rs 3.76 lakh crore during the first half of the session. (Representaive image/AI)
Market Crash Today: Indian equity markets witnessed a sharp decline on Thursday as benchmark indices Sensex and Nifty tumbled, mirroring weak global cues following the US Federal Reserve’s hawkish stance on rate cuts.
The BSE Sensex plunged 1,162.12 points to 79,020.08 in early trade, while the NSE Nifty fell by 328.55 points to 23,870.30. By 11 a.m., the Sensex had pared some losses but was still down nearly 1,000 points, trading at 79,242.65, and the Nifty was 1% lower at 23,946.30. Market capitalization eroded by approximately Rs 3.76 lakh crore during the first half of the session.
At 9:15 a.m., the Sensex was down 717.57 points (0.89%) at 79,464.63, and the Nifty declined by 217.10 points (0.90%) to 23,981.75. Almost all sectoral indices were in the red, with steep declines in Nifty IT, Nifty Auto, and Bank Nifty, which fell nearly 2%. The only outlier was Nifty Pharma, trading up by 1%.
Why Market Is Down Today?
Key Factors Behind the Indian Stock Market Crash
1. Hawkish US Fed Outlook:
The Federal Reserve dampened market sentiment by raising its inflation forecast and signaling fewer rate cuts for 2025. While it reduced the benchmark interest rate by 25 basis points to 4.25–4.50%, the Fed’s projection of just 50 basis points in cuts next year fell short of expectations for a steeper reduction of 3–4 rate cuts.
“Even though the rate cut of 25 bps was in tune with the market’s expectation, the indication of only two cuts of 25 bps each in 2025 against market expectation of three or even four cuts spooked the market resulting in a sharp sell-off in Wall Street,” V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
Suresh Darak, Founder, Bondbazaar, said, “The US Fed cut rates by 0.25% in their policy yesterday bringing the policy rates down between 4.25% and 4.5%. However, they lowered the rate cut guidance for calendar year 2025 from 4 cuts expected earlier to just 2, citing that inflation still remains elevated. This caught the market by surprise, leading to US dollar strengthening vs other currencies and causing turmoil in the global stock markets. The market now believes that rates may remain higher for longer.
“US 10 yr yields remain elevated and have crossed 4.5% after ~6 mth. It is interesting to note that the same has shot up by 0.85% (is at ~4.50% vs 3.65% in Sep 2024), during the same period when Fed has cut policy rates by ~1% (since Sep 2024),” Darak added.
Darak added that this move by the Fed is expected to keep other countries’ Central Bankers wary of cutting rates materially, apart from exerting pressure on their currencies. “Back home it would remain an important consideration for the RBI when the MPC comes up for their meeting in Feb 2025.”
2. Heavy FII Selling:
Foreign institutional investors (FIIs) sold shares worth Rs 8,000 crore over the past three sessions, rekindling concerns of aggressive FII outflows similar to October. So far in 2024, FIIs have offloaded Rs 2.94 lakh crore worth of equities. On Wednesday alone, FIIs sold shares worth Rs 1,316.81 crore, according to exchange data.
3. Weakening Rupee:
The rupee closed at a record low of 85 against the US dollar, further weighing on market sentiment. The Indian currency has depreciated by nearly 2% in 2024. A widening trade deficit in November exacerbated the pressure on the forex market. The rupee dropped 12 paise to an all-time low of 85.06 against the US dollar in early trade on Thursday, as a hawkish tilt from the US Federal Reserve sparked a broad dollar rally.
The rupee was under severe pressure as the US dollar charged ahead on hawkish FED outlook and flirted with a two-year peak at 108.04, while US 10-year bond yield rose to 4.51%, said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.
4. US Dollar Strength and Rising Bond Yields:
The US dollar index rose to a two-year high of 108.086 following the Fed’s decision, reflecting strong demand for the greenback. Meanwhile, US 10-year Treasury yields surged to 4.52%, signaling higher borrowing costs globally.
Vijayakumar remarked, “The spike in the dollar index and 10-year bond yields are negatives for FII fund flows. However, these impacts are likely to be temporary.”
The market’s near-term outlook hinges on global cues, FII activity, and the trajectory of the rupee against the dollar.
Investor Outlook
The sharp market sell-off on Thursday reflects a combination of global and domestic factors, including a hawkish stance from the US Federal Reserve, sustained FII selling, and a weakening rupee. These elements have triggered a wave of investor caution, eroding market capitalisation by trillions. While short-term volatility remains a concern, experts suggest that the market’s recovery could depend on future Fed decisions, stabilising currency markets, and potential shifts in FII investment flows. Investors will need to stay alert to these developments for clearer direction in the coming months.
Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Readers are advised to check with certified experts before making any investment decisions.
