Sensex dropped to 79,020.08; Nifty fell to 23,870.30
Updated: December 19, 2024, 12:05 PM IST – Mumbai
An employee at a stock trading firm monitors share prices on his computer. | Photo Credit: The Hindu
In a significant downturn on Thursday, December 19, 2024, India’s benchmark indices Sensex and Nifty experienced sharp declines during early trading hours. This slump aligns with global market trends following the U.S. Federal Reserve’s announcement suggesting fewer interest rate cuts in the coming year.
The 30-share BSE Sensex plummeted by 1,162.12 points, reaching 79,020.08 in the morning session. Simultaneously, the NSE Nifty tumbled by 328.55 points, settling at 23,870.30. All 30 blue-chip stocks listed on the Sensex were trading in the red, indicating a broad-based sell-off. Leading the decline were major players like Infosys, State Bank of India, Tata Steel, Asian Paints, JSW Steel, Bajaj Finserv, Bajaj Finance, and Mahindra & Mahindra.
Sensex and Nifty Plunge: Global Market Sentiments Weigh Heavy
Asian markets mirrored this downward trajectory, with key indices in Seoul, Tokyo, Shanghai, and Hong Kong trading lower. The negative sentiment was a spillover from Wall Street, which ended sharply lower on Wednesday, December 18, 2024.
V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented on the situation: “High valuations often make markets susceptible to sharp corrections triggered by even minor negative news. The U.S. Federal Reserve’s guidance of fewer rate cuts in 2025 provided such a trigger, countering market expectations. While the 25 basis points rate cut met forecasts, the indication of only two additional 25 basis points cuts in 2025—versus the market’s hope for three or four—unsettled investors, leading to a significant sell-off on Wall Street.”
He further added, “The Fed Chair’s remarks about the economy and labour market are, in fact, positive, highlighting the resilience of the U.S. economy. However, markets tend to react negatively when outcomes fall short of expectations.”
Investor Reactions and Institutional Movements
Foreign Institutional Investors (FIIs) responded to the bearish trends by offloading equities worth ₹1,316.81 crore on Wednesday, according to data from stock exchanges. This move underscores the cautious stance adopted by foreign investors in light of the evolving global economic landscape.
Prashanth Tapse, Senior Vice President of Research at Mehta Equities Ltd., provided additional insights: “The Federal Reserve’s decision to cut its benchmark interest rate by 25 basis points marked the third consecutive reduction this year. However, the bullish sentiment waned as the Fed adjusted its projections for 2025, outlining just two additional cuts. This revision dampened investor optimism and contributed to the market downturn.”
Domestic Market Performance
The domestic markets had already been on a declining trend prior to this latest drop. On Wednesday, the BSE Sensex fell by 502.25 points, or 0.62%, to close at 80,182.20, marking its third consecutive day of losses. The NSE Nifty also declined by 137.15 points, or 0.56%, ending the session at 24,198.85.
Market analysts suggest that the cumulative effect of global cues and domestic factors is influencing investor sentiment. The apprehension surrounding the U.S. Federal Reserve’s future monetary policy moves is creating uncertainty, prompting investors to adopt a risk-averse approach.
Sector-Wise Impact
The decline was widespread across various sectors. Technology stocks like Infosys faced significant pressure due to concerns about global economic growth and its potential impact on the IT services sector. Financial institutions such as State Bank of India and Bajaj Finance were also hit hard, reflecting worries about the banking sector’s health amid tightening monetary conditions.
Metal stocks, including Tata Steel and JSW Steel, suffered losses as well, influenced by fears of reduced industrial demand. The consumer goods segment wasn’t spared either, with companies like Asian Paints experiencing declines due to potential decreases in consumer spending.
Global Oil Prices and Currency Movements
Adding to the economic pressures, global oil benchmark Brent crude saw a slight dip of 0.40%, trading at $73.10 a barrel. Fluctuations in oil prices can have significant implications for India’s economy, affecting everything from inflation rates to the cost of imports.
Currency markets also felt the tremors, with the Indian rupee showing signs of weakness against the U.S. dollar. The interplay between oil prices, currency valuation, and stock market performance remains a critical area for investors to monitor.
Outlook and Investor Guidance
Market experts advise investors to exercise caution in the short term. The unexpected guidance from the U.S. Federal Reserve serves as a reminder of the intricate connections between global monetary policies and domestic market performance.
“The key for investors is to focus on fundamentals and long-term growth prospects,” suggested an analyst from a leading brokerage firm. “Volatility is inherent in equity markets, especially in times of global economic adjustments. Diversified portfolios and adherence to investment plans can help mitigate short-term fluctuations.”
The significant drop in Sensex and Nifty highlights the sensitivity of the Indian markets to global economic signals, particularly those emanating from major economies like the United States. As the U.S. Federal Reserve adjusts its monetary policy outlook, ripple effects are felt worldwide.
Investors and market participants will be closely watching upcoming economic data releases and policy announcements, both domestically and internationally, to gauge the future direction of the markets.
