After recovering over the past three weeks following two months of selling, India’s equity market is once again under pressure as investors adopt a cautious stance ahead of the crucial Federal Open Market Committee (FOMC) meeting outcome on Wednesday night.
Additionally, a weakening rupee and underwhelming macroeconomic data are dampening market sentiment.
In the past three sessions, the benchmarks - BSE Sensex and NSE Nifty – have shed about 2.3 per cent each with Sensex giving away nearly 2,000 points and Nifty sliding about 600 points.
The Nifty fell 137 points to settle at 24,199 on Wednesday, marking its lowest close in three weeks. The Sensex fell 502 points to close the session at 80,182.
"Persistent foreign fund outflows and caution ahead of the Federal Reserve's policy decision continued to dampen sentiment… The Nifty has breached a critical support level at 24,300, and the sharp decline in the banking sector, which had been pivotal in the recovery, is now exacerbating the weakness,” said Ajit Mishra – SVP, Research, Religare Broking.
The street expects the Federal Reserve to slash the benchmark interest rate by 25 basis points (bps) this time after slashing it to 4.50 - 4.75 per cent in November. The last policy outcome came after Republican candidate Donald Trump secured a landslide victory in the Presidential elections.
However, any hawkish tone regarding future rate cuts, especially after a rise in November inflation, may hamper investor sentiments globally. Consumer inflation in the US rose to 2.7 per cent last month, higher than the Fed's goal of bringing it down to a 2 per cent annual rate. Following this, few experts believe a slower pace of cuts in 2025. Add to it, President-elect Trump's proposed economic policies may further add to inflationary pressure.
Except for the Nifty pharma index (up 1 per cent), all other sectoral indices ended in the red with auto, energy, PSU Bank, metal, media and realty falling between 0.5 per cent and 2 per cent.
In the Nifty50 pack, Trent, Dr Reddy's Labs, Cipla, Wipro and Bajaj Auto were top gainers. Tata Motors fell 3 per cent and the other major laggards were Bharat Electronics, Power Grid Corp, JSW Steel and NTPC. In the broader market, BSE Midcap and Smallcap indices shed 0.5 per cent each.