India’s equity market fell sharply on Tuesday with the benchmarks – BSE Sensex and NSE Nifty50 – cracking nearly one and a half per cent each. The fall is largely attributed to the nervousness across all sectors ahead of key policy decisions from the US Federal Reserve, Bank of Japan and Bank of England.
At close, the Sensex stood at 80,684.45, down 1,064.12 points or 1.30%, and the Nifty fell 332.25 points or 1.35% to settle at 24,336. Investors lost about Rs 5 lakh crore in a single session as the market capitalization of BSE-listed firms came down to Rs 456.59 lakh crore from Rs 461.33 lakh crore on Monday.
“While the market has already factored in a 25bps cut from the US Fed, it remains vigilant for any hawkish signals. The BoJ and BoE are largely expected to maintain their current rates for the year. Concurrently, the INR has depreciated to an all-time low, and a record-high trade deficit is exacerbating the pressure,” said Vinod Nair, Head of Research, Geojit Financial Services.
The Rupee ended marginally lower at 84.90 per dollar on Tuesday versus Monday's close of 84.87. The trade deficit reached a record high of $37.8 billion in November.
Among sectors, almost all the major sectoral indices registered profit booking at higher levels, but the PSU Bank index and Metal index lost the most, shedding up to 1.89%. The broader indices also ended in the red, but their losses were comparatively moderate.
“This trend highlights a renewed selling spree by Foreign Institutional Investors (FIIs) ahead of the US Federal Reserve meeting. Moving forward, a decisive break below the 24,300 mark could hinder the recovery and potentially drag the index toward 24,000. In this cautious market environment, traders are advised to adopt a hedged strategy and wait for clarity,” said Ajit Mishra – SVP, Research, Religare Broking. FII outflows persist due to rising US bond yields and a strengthening dollar.
Prashanth Tapse, Senior VP (Research) at Mehta Equities said that while weak Asian cues weighed on the market sentiment and the record high trade deficit in November pushed the rupee to a new low which caused investors to run for cover triggering panic selling in domestic equities.
“We expect the sentiment to remain cautious with a weak bias over the next few days as investors await the US FOMC meeting outcome,” added Tapse.
Shriram Finance, Bharti Airtel, Grasim Industries, Hero MotoCorp and JSW Steel were top losers in the Nifty50 pack. The only gainers were Cipla and ITC.
Commenting on the Rupee, Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities said that a dovish tone by the Fed could push the dollar index lower, providing relief for the rupee. He added, “However, any uncertain or hawkish remarks may strengthen the dollar and keep participants bearish on the rupee. The rupee's range is anticipated between 84.75 and 85.05."