Investors lost an estimated Rs 7 lakh crore over two sessions as Indian stock markets witnessed a steep correction driven by a combination of factors, including the delay in finalizing a key India-US trade agreement and broad-based profit booking following a sustained period of market rally.
While the overall market capitalisation of BSE-listed firms has come down from Rs 477.5 lakh crore to Rs 470.2 lakh crore in two sessions, India’s benchmark indices -- NSE Nifty and BSE Sensex -- declined about 1% each.
Hurt by sharp selling in the last 30 minutes of trading, the Sensex closed the Monday session at 84,900.71, down 331 points, or 0.39%, while the Nifty 50 ended at 25,959.50, falling 109 points, or 0.42%. The BSE Midcap and Smallcap indices ended with losses of 0.27% and 0.83%, respectively
Analysts at Bajaj Broking said that volatility escalated amid concerns around interest-rate policy, persistent FII selling, uncertain trade and tariff developments, and broader market weakness. Vinod Nair, Head of Research, Geojit Investments, said that investor sentiment remained cautious, in anticipation of delays in finalising the interim US-India trade agreement.
The India-US trade pact holds significant importance for investors. Currently, high US tariffs on Indian exports (up to 50%) have hurt Indian exporters’ profit margins and export volumes, directly affecting listed companies with significant US revenue exposure. A trade deal reducing these tariffs to a more reasonable level (15-16%) would revive demand for Indian goods in the US market, improving earnings for exporters and positively impacting the stock market.
The pact would also signify deepening economic ties between the two countries, enhancing India’s attractiveness as a global investment and supply chain hub.
“Nonetheless, selective buying in IT stocks offered some support. On a brighter note, global markets remain optimistic, fueled by renewed expectations of a December Fed rate cut, prompted by downside risks to U.S. employment data. Domestically, favourable macro indicators, including GDP growth, controlled inflation, stable oil prices, and a strong H2 earnings outlook, have contributed to market stability,” stated Nair.
Most sectoral indices traded in the red, reflecting broad market weakness, with Nifty Realty leading the decline at over 2%. Metal, Consumer Durables, Oil and Gas, Healthcare, FMCG and Media also saw notable losses. The Nifty IT index was the clear standout, advancing more than 1.6% as markets factored in a higher likelihood of a December U.S. Federal Reserve rate cut (now estimated at 70% versus 44% a week earlier). This pushed four of the top six Nifty performers into the technology pack.
Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services, said that the depreciation in the rupee may contribute to near-term caution in equities as worries about imported inflation, higher input costs, and pressure on import-heavy sectors intensify.
According to the RBI, the rupee’s recent weakness is largely driven by elevated dollar demand, which could moderate if India and the U.S. secure a trade agreement. The Indian rupee touched a record low of Rs 89.49 per dollar on Friday amid rising domestic demand for the greenback.
“Foreign institutional investors sold equities worth Rs 1,766 crore on November 21, adding to the subdued mood. Earlier attempts by the Nifty to surpass the September 2024 peak had stalled due to the absence of the expected U.S.–India trade deal. Today marked the second consecutive session of profit-taking after the index had risen in eight of the previous nine sessions. In the absence of major domestic macro announcements until the GDP numbers on Friday, market sentiments are likely to remain cautious until we see some progress on the India-US trade talks, while fluctuating foreign flows could add to interim volatility,” stated Khemka.