Benchmark stock market indices nosedived on Monday, with the Sensex falling over 900 points and the Nifty falling over 300 points. The stock market witnessed widespread selling, pushing investor wealth down by over Rs 5 lakh crore.
The Sensex was down 879.56 points to 76,499.35 at 1:56 pm, while the NSE Nifty50 was trading 300 points lower at 23,131.50. All the other broader market indices were trading in negative territory as volatility skyrocketed during the afternoon trading session.
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All Nifty sectoral indices also traded deep in negative territory, with Nifty Realty falling nearly 6%. Nifty Auto and Nifty Metal were also top losers in percentage terms.
However, the trigger was a sharp decline in banking, financial and IT stocks, which failed to hold gains as the session progressed.
The stock market’s fall was driven by losses across major banking stocks such as HDFC Bank and ICICI Bank. Only three of the 50 Nifty50 constituents were trading in negative territory, reflecting the weakness on Dalal Street.
WHAT’S BEHIND THE MARKET BLOODBATH?
The stock market’s dismal performance today has been primarily attributed to a mix of factors that severely hit investor sentiments.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the market is facing significant headwinds. The strong US jobs report for December, showing 2.56 lakh job additions, has reduced expectations for multiple rate cuts by the US Federal Reserve in 2025.
According to him, this shift in the US economic outlook, coupled with a strengthened dollar, has weighed heavily on emerging market currencies, including the rupee, which plummeted to a record low of 86.39 against the dollar.
Additionally, the rise in global crude oil prices, with Brent crude breaching $81 per barrel, has reignited inflationary concerns, further dampening market sentiment. The global macroeconomic environment, coupled with continued foreign outflows, has made it more challenging for Indian equities to attract investments.
Additionally, foreign Institutional Investors (FIIs) have been key drivers of market volatility, pulling over $4 billion from Indian equities this month alone. This follows an outflow of $11 billion in the previous quarter.
The continued uncertainty surrounding US monetary policy and the potential impact of President-elect Donald Trump’s economic strategies have exacerbated bearish sentiment in global markets, contributing to further outflows from emerging markets like India.
Despite the foreign sell-off, domestic investors have shown resilience. As per provisional data from the NSE, Domestic Institutional Investors (DIIs) purchased Rs 3,961.92 crore worth of shares on Friday, offsetting some of the FII selling pressure. However, analysts are cautious about the outlook for the short term.
WHAT’S NEXT?
As volatility continues to haunt the market, experts predict that the bearish trend could persist in the near term.
Vijayakumar noted that the US job data, while positive for the US economy, could lead to fewer rate cuts, further impacting emerging market sentiments. The ongoing global uncertainties, including concerns about inflation and crude prices, add to the challenges.
Looking forward, analysts suggest that markets could remain weak until March, with stability expected to return around April. Emkay Global, in a recent note, projected that the Nifty could remain subdued, with a conservative target of 25,000 for 2025. However, it noted that small and mid-cap stocks could outperform, offering a glimmer of hope for investors seeking opportunities beyond the large-cap index.
While the short-term outlook remains challenging for the stock market, with continued foreign outflows and global macroeconomic pressures, a potential recovery could take shape as earnings outlooks improve and FII selling subsides in the coming months.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
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