Sensex-Dips

Sharp Sell-Off Continues: Investor Concerns Deepen as Indian Stock Market Struggles with Record Losses and Inflation

 

The Indian stock market suffered a sharp hit on December 19, 2024. The Sensex crashed more than 1,200 points, and the Nifty fell 329 points to close at 23,870. Investors lost nearly ₹13 lakh crore in four days as the market faced intense pressure. This is the fourth straight session of losses, driven by global uncertainties, a weak rupee, and inflation concerns.

This is one of the steepest falls in recent sessions and leaves the traders on tenterhooks. Global and domestic factors had created a storm for Indian equity. Concerns about slower US rate cuts, foreign investor selling, and inflation fears triggered a wide sell-off. The weak rupee and record-high trade deficit added more pressure, deepening the fall.

All the sectoral indices closed the market day in the red. The market sentiment continued to be fragile, and investors are all set to face more turbulence during the coming days.

 

Key Factors Behind the Market Crash

 

Fed Reserve Rate Cut Expectation

 

Although the US Federal Reserve cut its benchmark interest rate by 25 basis points to 4.25-4.50%, it indicated slower rate cuts in the pipeline. The said move dampened global market sentiment, and the sell-offs began in the major Asian markets, including India. The 3% decline in the S&P 500 and Nasdaq added further pressure to the market.

FIIs resumed selling Indian equities at will, and over ₹8,000 crores sold out within three sessions. Strengthening dollar and fewer rate cuts being perceived are driving the flows to add to market woe.

 

Weak Rupee

 

The Indian rupee has touched a record low of 85.3 against the dollar, deterring foreign investments and driving up inflationary worries. A lower rupee boosts import costs, tightening monetary policy expectations and further hurting market sentiment.

 

Rising Domestic Inflation

 

In India, November inflation fell slightly to 5.48% but remained around the Reserve Bank of India's upper limit of 6%. This reduced expectations that interest rates would be cut shortly.

 

Macro Economic Concerns

 

The country's trade deficit recorded its highest-ever value in November at $37.84 billion, up from $21.31 billion in the same month last year. Growth in GDP slowed down during the second quarter, and earnings during the first two quarters of FY24 caused more uncertainty in the market.

 

Sectoral Performance

 

All sectoral indices traded in the red. PSU banks, metals, and realty bore the biggest brunt of this loss. Tata Steel, JSW Steel, and Shriram Finance were key laggards, which slipped 3-4%.

 

Market Outlook

 

The sales have been so sharp that Sensex lost nearly 2% weekly. The worst hit sectors have been banking, metals, and realty. Analysts feel that the foreign capital outflows can be sustained for days ahead, and the inflationary pressures may continue to keep the markets volatile.

Experts suggest that the market may stay volatile in the near term as it is focused on Q3 corporate earnings and global economic developments. The FIIs have been somewhat supportive, but macroeconomic challenges are still a heavy burden on Indian equities, so domestic institutional investors have been somewhat supportive.