Benchmark stock market indices in India witnessed a significant decline on Thursday, with the S&P BSE Sensex plummeting over 1,100 points, erasing all the gains from the previous session. This steep fall came despite a continued rally in Adani Group stocks, highlighting that broader market concerns and weaknesses in specific sectors were driving the downtrend. The Sensex closed the day at 79,043.74, down by 1,190.34 points, while the Nifty50 dropped by 360.75 points, settling at 23,914.15.
The decline in Indian markets followed global market volatility, triggered by the release of stronger-than-expected US inflation data. The report revealed robust consumer spending in October, leading to speculation that the Federal Reserve might adopt a slower pace of rate cuts. Traders have priced in a 65% chance of a rate cut next month, but growing doubts about further easing in 2025 have left markets in a state of uncertainty. This has contributed to a broader risk-off sentiment, with the MSCI Asia-Pacific index (excluding Japan) slipping by 0.07%, as investors remained cautious in the face of these shifting global dynamics.
Mandar Bhojane, a Research Analyst at Choice Broking, noted that the global economic environment remains uncertain, particularly due to concerns about the trajectory of US rate cuts. He emphasized that sectors like IT and pharma, which are heavily reliant on exports, are particularly vulnerable to such developments. According to Vinod Nair, Head of Research at Geojit Financial Services, the Indian market had a strong start to the week but was hit by a wave of selling following the overnight slump in US markets. The renewed uncertainty surrounding the US Federal Reserve’s interest rate decisions and escalating geopolitical tensions, particularly in Ukraine, contributed to the correction in the domestic market.
Vishnu Kant Upadhyay, AVP of Research & Advisory at Master Capital Ltd, attributed the sell-off in Indian markets to a combination of factors, including weaker-than-expected US PCE inflation data. This data raised doubts about a potential interest rate cut in the upcoming December Federal Open Market Committee (FOMC) meeting. Moreover, geopolitical developments such as Russia's missile strikes on Ukrainian cities, including Odesa, Kropyvnytskyi, and Kharkiv, further dampened investor sentiment. According to Upadhyay, this geopolitical tension added to the already prevailing global market instability.
The downturn was particularly pronounced in key sectors, with Information Technology (IT) and automobile stocks leading the way. The Nifty IT index suffered a significant drop of more than 2.4%, with major players such as Infosys, HCL Technologies, and Tech Mahindra experiencing losses between 2% and 4%. IT companies are particularly sensitive to global economic conditions, especially as many of them rely heavily on exports from developed markets like the US. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explained that the growing uncertainties around the global economic outlook were contributing to the weakness in sectors like IT, which have substantial exposure to overseas markets. He also suggested that the ongoing consolidation phase could continue for the time being, particularly if foreign institutional investors (FIIs) maintain a cautious approach and do not turn into aggressive buyers in the short term.
Meanwhile, the Indian rupee weakened slightly, falling by 6 paise to 84.46 against the US dollar. This reflected the strengthening of the dollar, which has historically put pressure on emerging markets, including India. A stronger dollar makes commodities like oil more expensive, and the volatility in crude oil prices further exacerbates the situation. Brent crude was trading at $72.79 per barrel at the close, marking a slight rebound after earlier fluctuations. A surprise jump in US gasoline (petrol) stocks ahead of the Thanksgiving holiday raised concerns over demand, adding another layer of complexity to the already volatile global market conditions.
While domestic institutional investors (DIIs) made net purchases worth Rs 1,301 crore on Wednesday, foreign institutional investors (FIIs) continued their net selling, adding to the downward pressure on the markets. Bhojane pointed out that the Nifty 50 is trading in a narrow range between 24,000 and 24,350, with the immediate support level seen at 24,000. A breakout above the 24,400 level could see the index move higher, but with the ongoing global uncertainties, the path forward remains uncertain.
Investors are likely to continue closely monitoring global cues, especially regarding US economic data, the Federal Reserve's decisions, and geopolitical tensions. Domestically, factors such as India's GDP growth, inflation trends, and corporate earnings will also play an important role in shaping market sentiment in the short term. The outlook suggests continued volatility and caution, as market participants navigate a complex landscape of external challenges and internal economic dynamics.
In summary, while India’s stock market showed strong promise earlier in the week, the correction seen on Thursday underlines the prevailing uncertainty in global markets. With the prospect of slower US rate cuts, a stronger dollar, and geopolitical tensions weighing heavily on investor sentiment, market participants will likely remain cautious. A close eye on key economic data, both in India and abroad, will be crucial in determining the direction of markets in the coming days.
