Stock markets slumped in early trading on Tuesday, with the benchmark indices Sensex and Nifty falling by approximately 1% for a second consecutive session.
The downturn occurred as investors remained cautious ahead of the US Federal Reserve’s meeting set for December 18.
The NSE Nifty50 lost 274 points to its lowest point of the day at 24,394.20, while the S&P BSE Sensex plunged 941 points to an intra-day low of 80,806.64.
Midcap and smallcap stocks fared marginally better, with both Nifty Midcap and Nifty Smallcap down only 0.06%, despite the main indices’ dip.
Why Market Crash?
The outcome of the December 18 meeting of the US Federal Reserve is being eagerly watched by global financial markets. Investors are eager to hear the Fed chief’s thoughts on the future trajectory of interest rates, even if markets have already priced in a 25 basis point rate decrease. Any sudden action or declaration might have an adverse impact on international markets.
India’s November trade deficit jumped to $37.8 billion, which placed pressure on the rupee. The rupee is probably going to go towards Rs 85 to the dollar, which would help exporters like pharmaceutical and IT firms but raise importers’ expenses. The stock values of industries that rely on imports have been impacted by this.
Geojit Financial Services’ Chief Investment Strategist, Dr V K Vijayakumar, provided an explanation of the decline’s causes.
“International markets are anticipating the US Federal Reserve’s remarks. If the Fed takes a less supportive stance, it could hurt market sentiment. However, this is unlikely,” he said.
The indexes were pulled down by large corporations, commonly referred to as index heavyweights, such as Infosys, HDFC Bank and Reliance Industries. The market saw an overall fall as a result of investors selling their shares in these large corporations.
“India’s widening trade deficit is also a major concern. A weaker rupee will help exporters like IT and pharma firms, but for importers, it increases costs. This has started to reflect in stock prices,” Vijayakumar added.
With 29 of its 30 stocks trading lower, the Sensex saw a widespread sell-off. The index’s sole gainer was Adani Ports. The day’s biggest declines included other large equities including Larsen & Toubro, HDFC Bank, Reliance Industries, ICICI Bank and Bharti Airtel.
Only four of the NSE Nifty50’s 46 stocks—Adani Ports, Cipla, Adani Enterprises, and Tata Motors—were able to maintain their gains. Shriram Finance, Bajaj FinServ, Grasim Industries, Bharti Airtel and PowerGrid were the top Nifty50 losers.
The overall weakness of the market was mirrored in sectoral indicators. Nifty Oil and Gas, Nifty Bank and Nifty Financial Services all had declines of more than 1%. Nifty Auto, Nifty FMCG, Nifty IT and Nifty Metal were among the sectors that had losses of above 0.5% at the end of the day. However, Nifty Media and Nifty Realty managed to rise about 1% each, defying the trend.
There were conflicting market trends in the FMCG industry. LT Foods, Nakoda Group of Industries and Umang Dairies were among the companies that had gains of 1% to 5%. However, there were more than 1% drops in the top FMCG stocks, such as Emami, Patanjali Foods, Britannia Industries and Colgate-Palmolive. While larger businesses experienced pressure to sell, this mixed pattern showed selective buying in smaller equities.
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