India’s stock market on Monday logged its worst trading session in more than two months due to continued foreign outflows as the India-US trade deal remains in limbo. The upcoming meeting of the US Federal Reserve also had an impact on sentiment.
The 30-share BSE Sensex fell 0.71% to 85,102.69 points, while the Nifty 50 fell 0.86% to 25,960.55, their biggest single-day fall since December 26. The main highlights of the stock market today are as follows:
- With the fall, Nifty VIX (Volatility Index) rose by a sharp 7% to 11, indicating increasing uncertainty.
- On Monday, all 16 major sectors closed with a decline. Broader midcaps and smallcaps fell 1.8% and 2.6%, respectively.
- Heavyweight financial and IT stocks slipped 0.7% and 0.3%, respectively.
- PSU bank, real estate and defense shares fell between 2.8% and 3.7%.
“Nifty slips below 26,000 support following monetary policy optimism,” said Rupak Dey, senior technical analyst at LKP Securities.
“Sentiment looks weak in the short term, the index could potentially slip to 25,730. On the higher side, resistance is placed at 26,000-26,100.”
Foreign investors have sold more than $1 billion of local shares so far in December, bringing year-to-date outflows to nearly $18 billion, according to data from the National Securities Depository Ltd. They were cautious ahead of the US Federal Reserve’s policy decision later this week and whether RBI’s rate cuts will be effectively transmitted.
“An RBI rate cut may not be coming anytime soon due to the high credit-deposit ratio. This, coupled with persistent tariff uncertainty, is weighing on the market,” Anita Gandhi, founder and head of institutional business at Arihant Capital Markets, told Reuters.
Obviously, there was no single cause of the stock market decline that ended Today the wealth of investors is Rs 7 lakh crore.
1. US Fed panic: The main driver was extreme caution ahead of the US Federal Reserve’s interest rate decision (FOMC meeting). Risks were reduced aggressively due to the Fed maintaining a dovish stance or the possibility of a surprise outcome. A stronger US dollar as a result of US Fed policy puts heavy pressure on emerging markets.
2. Continued FII outflows, weak rupee: Rupee is at an all-time low against the US dollar 90.38). This severe currency devaluation directly reduces returns to foreign institutional investors (FIIs), forcing them to sell their equity holdings. This selling pressure creates a negative feedback loop, causing the Sensex to fall sharply.
- “With the Fed policy outcome and India CPI data out this week, volatility is likely to remain high,” said Jatin Trivedi, vice president and research analyst – commodities and currency, LKP Securities. “The rupee is expected to trade in a weak range of 89.75-90.30.”
3. Rising prices of crude oil: The rise in global crude oil prices increases India’s import bill and increases inflationary pressures. Additionally, uncertainty over the India-US trade deal weakened investor sentiment, especially in trade-sensitive sectors.
“Despite strong domestic growth data and RBI’s recent rate cut, short-term sentiment in the stock market remains eclipsed due to global monetary policy concerns, persistent FII outflows and currency depreciation,” said Vinod Nair, Head of Research, Geojit Investments Ltd.
“Volatility was further heightened by a rise in Japanese bond yields to multi-year highs, raising fears of a possible termination of the yen carry trade.”
