On Tuesday, December 17, the Indian stock market faced a significant decline for the second consecutive session, with both benchmark indices, Sensex and Nifty50, falling by over 1%. The Sensex lost 930 points, hitting an intraday low of 80,781.50, while the Nifty50 fell 262 points, reaching a day’s low of 24,375.85. The decline was largely attributed to heavyweights such as Reliance Industries, Infosys, and HDFC Bank, as investors adopted a cautious stance ahead of the US Federal Reserve's key policy meeting scheduled for December 18.
The sell-off was most pronounced in the financial, oil and gas, and IT sectors, with stocks in these sectors dragging the indices lower throughout the day. Despite this, the broader markets showed some resilience, with the Nifty Midcap and Nifty Smallcap indices losing just 0.06%.
The India VIX, a gauge of market volatility, surged by nearly 6% to 14.8, reflecting increasing nervousness among investors. This spike indicates heightened concerns as market participants await the outcome of the US Federal Open Market Committee (FOMC) meeting, where a rate cut of 25 basis points is expected. However, investors are keenly watching for any deviation in the Fed’s commentary that could affect global markets. According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, while a rate cut is largely factored in, the Fed Chair’s statements could have a significant impact on market sentiment.
Additionally, India’s growing trade deficit, which widened to $37.8 billion in November, is putting pressure on the rupee. Vijayakumar noted that the rising deficit could lead the rupee towards 85 against the dollar. Export-driven sectors like IT and pharma could benefit from a depreciating rupee, while importers might face higher costs, which could negatively impact their stock performance.
Among the Sensex stocks, Adani Ports was the only gainer, while the other 29 stocks closed in the red. HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel, and L&T were the key draggers on the index. On the Nifty, Adani Ports, Cipla, Adani Enterprises, and Tata Motors saw positive movement, while Shriram Finance, Bajaj Finserv, Grasim, Bharti Airtel, and PowerGrid were the major losers, falling between 1% and 3%.
Sectorally, the financial and oil & gas sectors faced significant losses, with the Nifty Bank, Nifty Financial Services, and Nifty Oil & Gas indices each falling by over 1%. Other sectors, including Nifty Auto, Nifty IT, Nifty FMCG, and Nifty Metal, saw declines of more than 0.5%. This downturn reflects investor caution as they brace for the upcoming Fed meeting and its potential impact on global liquidity and market sentiment.
