Bears halt New Year rally as Sensex sinks nearly 800 points, Nifty slips below 24,000 - Key factors behind market decline today

Wipro, ICICI Bank, HDFC Bank, Tech Mahindra and Adani Ports were among the major losers on the Nifty

Bears pressed the brakes on the New Year rally in the frontline equities on Friday as key indices traded lower, dragged by weakness in banking and IT stocks.

The Sensex tumbled 720.60 points or 0.90 percent to close at 79,223.11 despite a positive beginning. During the day, it slumped 833.98 points or 1.04 percent to 79,109.73.

The NSE Nifty tanked 183.90 points or 0.76 percent to 24,004.75. Intraday, it hit a low of 23,976, down 212.65 or 0.87 percent.

This marked a sharp reversal from the robust gains of 2.3 percent seen in the first two trading sessions of 2025, as a mix of global and domestic factors weighed on investor sentiment ahead of the earnings season.

Key Factors Behind Market Decline

1. Rise in Crude Prices: Global crude oil prices surged, with Brent crude futures rising $1.29, or 1.7 percent, to settle at $75.93 per barrel. Optimism about China’s economic recovery and fuel demand, following President Xi Jinping’s pledge to promote growth, contributed to the rally in oil prices. Elevated crude prices pose inflationary risks for oil-importing nations like India, dampening market sentiment.

2. Unfavourable Macro Conditions: The macroeconomic backdrop remains challenging, with the dollar index climbing to 109.22 and the U.S. 10-year Treasury yield at 4.56 percent. This environment discourages sustained foreign institutional investor (FII) inflows, impacting emerging markets such as India.

3. Weak Expectations of U.S. Rate Cuts: Fresh U.S. economic data signalled a strong labour market, reducing the likelihood of aggressive rate cuts by the Federal Open Market Committee (FOMC). The US Federal Reserve recently projected just two rate cuts in 2025, down from earlier expectations of four.

Stock Market LIVE Updates

Markets now estimate an 88.2 percent probability of a pause in January, according to the CME FedWatch Tool. Higher U.S. interest rates diminish the attractiveness of Indian markets for foreign investors. The impact was evident in IT stocks, including TCS, Infosys and others, which saw significant declines due to their heavy reliance on U.S. revenue streams. "The pullback in IT stocks as well as the benchmarks is expected after the sharp rise in the previous session," Aditya Gaggar, a director at Progressive Shares told Reuters.

Technical Set-Up

Analysts pointed to the critical technical support level of 24,000 for the Nifty. Ajit Mishra, Senior Vice President, Research, Religare Broking Ltd, noted that a breach of this level could push the index into a sideways trend, adding to market volatility.

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