Indian equity markets experienced a downturn on Tuesday as investors engaged in broad-based selling ahead of the Federal Reserve’s monetary policy meeting. The meeting is expected to provide insights into the Fed’s interest rate decisions for the coming year.
Market Overview
The NSE Nifty 50 index fell by 1.35%, closing at 24,336 points, while the BSE Sensex dropped 1.3% to 80,684.45. Both benchmarks faced pressure from widespread selling, with all sectoral indices apart from media reporting losses. Meanwhile, small-cap and mid-cap stocks, which are more focused on the domestic market, declined by 0.7% and 0.8%, respectively.
Adding to the market’s woes, the Indian rupee hit a lifetime low, further dampening investor sentiment.
Contributing Factors
Foreign investors appeared to offload shares after data revealed that India’s trade deficit reached a record high in November. Analysts believe this, coupled with uncertainty surrounding the Federal Reserve’s monetary easing plans for 2025, contributed to the bearish sentiment.
“Market sentiment was weighed down by selling pressure as foreign investors awaited clearer signals on further monetary policy easing from the Fed,” noted Sunny Agrawal, Head of Fundamental Equity Research at SBICaps Securities.
Sectoral Performance
- Financials, the largest sector on the Nifty 50, dropped 1.44%, led by a 1.7% decline in HDFC Bank following a regulatory warning over alleged non-compliance with disclosure norms.
- Reliance Industries, another Nifty heavyweight, slid by 1.8%, pulling the energy sector down by 1.6%.
- IT stocks, which derive significant revenue from the U.S., fell by 0.5% amid global uncertainties.
Foreign Investor Activity
On Monday, foreign investors net sold Indian equities worth 2.79 billion rupees (approximately $32.87 million). Data for Tuesday’s trading session is anticipated later in the day. Historically, monetary easing by the U.S. Federal Reserve has bolstered emerging market assets like Indian stocks by encouraging foreign inflows.
Notable Stock Movements
- Zomato shares rose by approximately 1%, buoyed by positive sentiment from brokerage Nuvama. The firm forecasted that the food delivery platform would attract inflows of nearly $513 million when it joins the BSE Sensex on December 23.
Global Context
While markets largely anticipate a quarter-point rate cut at the conclusion of the Fed’s two-day meeting on Wednesday, concerns persist over potential scaling back of monetary easing in 2025, particularly in light of inflation expectations under the current U.S. administration.
Closing Remarks
As Indian markets grapple with external pressures and domestic challenges, all eyes remain on the Federal Reserve’s policy announcement. Investors are hoping for clarity that could help stabilize markets and potentially reverse the ongoing bearish trend.