E-Paper
Stock Market Today | Sensex, Nifty post worst day in over two months on US Fed FII jitters
There's not one single reason for the stock market crash that wiped out ₹7 lakh crore in investor wealth today.
India's stock market logged its worst trading session in more than two months on Monday, on persistent foreign outflows stemming from an India-US trade deal in limbo. The upcoming meeting of the US Federal Reserve also weighed on sentiment.
The 30-share BSE Sensex fell 0.71% to 85,102.69 points even as the broader Nifty 50 lost 0.86% to 25,960.55, reccording their biggest single-day declines since 26 December. Here are the key highlights from the stock market today:
- The drop was accompanied by a sharp 7% rise in the Nifty VIX (Volatility Index) to 11, signalling heightened uncertainty.
- All 16 major sectors ended lower on Monday. The broader midcaps and smallcaps lost 1.8% and 2.6%, respectively.
- Heavyweight financial and IT stocks slipped 0.7% and 0.3%, respectively.
- PSU Bank, real estate, and defence stocks fell between 2.8% and 3.7%.
“Nifty slipped back after the monetary policy optimism, breaking below the 26,000 support,” said Rupak De, senior technical analyst at LKP Securities.
“The sentiment looks weak in the short term, with the index potentially sliding towards 25,730. On the higher side, resistance is placed at 26,000–26,100.”
Foreign investors have sold over $1 billion of local stocks so far in December, putting the year-to-date outflows at 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 over how effectively the Reserve Bank of India's rate cuts will be transmitted.
“RBI's rate cut transmission may not happen soon due 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.
Clearly, there was not one single reason for the stock market crash that wiped out ₹7 lakh crore in investor wealth today.
1. US Fed jitters: The main driver was the extreme caution ahead of the US Federal Reserve's interest rate decision (FOMC meeting). The possibility of the Fed maintaining a hawkish stance or a surprise outcome led to aggressive de-risking. A stronger US dollar resulting from US Fed policy puts immense pressure on emerging markets.
2. Relentless FII outflows, weak rupee: The rupee is at near all-time lows against the US dollar (around ₹90.38). This severe currency depreciation directly erodes the returns for foreign institutional investors (FIIs), compelling them to sell their equity holdings. This selling pressure creates a negative feedback loop, causing a rapid Sensex fall.
- “With the fed policy outcome and India CPI data lined up this week, volatility is likely to remain elevated,” said Jateen Trivedi, vice president and research analyst - commodity and currency at LKP Securities. “The rupee is expected to trade in a weak range of 89.75–90.30.”
3. Rising crude oil prices: An increase in global crude oil prices raise India's import bill and fuel inflationary pressures. Moreover, the lingering uncertainty surrounding the India-US trade deal dampened investor sentiment, particularly in trade-sensitive sectors.
“Despite robust domestic growth figures and RBI’s recent rate cut, short-term sentiment (in the stock market) remains overshadowed by global monetary policy concerns, persistent FII outflows, and currency depreciation,” said Vinod Nair, head of research at Geojit Investments Ltd.
“Volatility was further amplified by a surge in Japanese bond yields to multi-year highs, sparking fears of a potential unwinding of the yen carry trade.”
