The benchmark indices Sensex and Nifty declined for the third straight session on December 18 amid foreign fund outflows and caution ahead of the US Fed interest rate outcome.
BSE benchmark Sensex was down by 634.38 points or 0.78 percent to its intraday low of 80,050.07. The NSE Nifty dipped 186.15 points to 24,149.85. Financials, power and auto sectors dragged the benchmarks.
Here are key factors behind the market decline today:
1) Trump threatens reciprocal tax: Markets likely reacted to US President-elect Donald Trump reiterating his intention to impose reciprocal tariffs in retaliation for the high tariffs imposed by India on import of certain American products. Trump made these remarks on Tuesday and also said that India and Brazil were among countries that impose high tariffs on certain US products. The statement by the President-elect creates concern for traders over a potential trade conflict between the two nations, which could lead to the increased costs for Indian exports.
2) FII Outflows Drag Market: A massive sell-off by FIIs has dampened the mood in Indian markets. On Tuesday, FIIs offloaded equities worth Rs 6,409.86 crore, contributing to the bearish sentiment. “The near-term market construct has turned weak with FIIs selling on rallies. Yesterday’s FII sell figure of Rs 6,410 crore in the cash market indicates more selling may follow during market bounces,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Vijayakumar attributed the heavy selling to the relative underperformance of Indian markets compared to the US. While the S&P 500 has gained 27.5 percent year-to-date, the Nifty has risen only 12 percent in the same period. "This significant disparity in performance may persist, given the resilience of the US economy against the backdrop of challenges in the Indian economy," he noted.
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3) US Fed Outcome in Focus: Global market attention has turned to the US Federal Reserve’s monetary policy decision expected later tonight. While a 25-basis point rate cut has been widely anticipated, the focus remains on the Fed’s commentary regarding future policy actions.
"There are concerns in global markets that the Fed might signal a pause or a slowdown in the pace of rate cuts going forward, which could lead to a more cautious outlook for upcoming policy meetings,” said Devarsh Vakil, Deputy Head of Retail Research at HDFC Securities.
The combination of persistent FII selling and uncertainty over the Fed’s stance is keeping investors on edge, driving markets lower.
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