Market logs biggest weekly crash in 2 years, wipes Rs 17 lakh crore m-cap from BSE-listed firms

The smallcap and midcap indices also lost around 3.5 percent each this week.

It was bloodbath on Dalal Street this week as benchmark indices--the Sensex and the Nifty 50 recorded their steepest weekly fall in two years. The culprits? The Federal Reserve's cautious stance and a shallower rate cut trajectory for 2025 which intensified FII selling in the domestic market.

With today's fall, the Sensex shed 5 percent for the week, plummeting over 1,000 points for three out of the five sessions. As a result of the relentless fall, around Rs 17 lakh crore worth of market cap was wiped out of BSE-listed firms.

On the other hand, the Nifty 50 which also happened to drop around 5 percent this week, slipped below its 200-day exponential moving average (DEMA) to fall back into the correction territory. This means that the Nifty 50 is now down over 10 percent off its record high.

On December 20, marking the end of the week, the Nifty closed at a one-month low of 23,587.50, with a cut of 1.5 percent while the Sensex also lost 1.5 percent to close at 78,041.59. The broader market sentiment also tilted towards laggards as 2,859 shares fell, while just 963 ended higher and 95 remained unchanged.

"Disappointment regarding the slower-than-anticipated rate cuts by the US Fed has adversely affected global market sentiment, with the bearish outlook particularly impacting the domestic equities which were already contending with high valuations and low earnings growth," Vinod Nair, Head of Research, Geojit Financial Services.

Also Read | Nifty crashes 1,200 points in 5 days as Fed caution continues to weigh; other key factors why market is falling

Nair also highlighted the widespread sell-off with significant declines in mid- and small-cap stocks where valuations premiumisation is at historical peak.

Tacking the selloff in the broader market, the Nifty Midcap 100 plunged 2.8 percent and the Nifty Smallcap 100 was down 2.2 percent. With this, the Nifty Midcap 100 and Smallcap 100 indices continued its downward journey for the fourth day on the trot.  For the week, both the indices were down around 3.5 percent each.

Apart from these, all the sectoral indices ended in the red today with the Nifty Reality, Nifty PSU Banks, and Nifty IT falling the most. The Nifty Bank index also dropped 1.5 percent today which took its weekly fall to 5.3 percent.

After violating its 200 days SMA (Simple Moving Average) and EMA supports, Nandish Shah, Senior Derivative & Technical Research Analyst, HDFC Securities sees a continuation of the downtrend, with the only support visible on the chart at the swing low of 23,263. "Moving ahead, the 200 days SMA which is placed at 23,834 is now expected to act as an intermediate resistance for the short term," Shah added.

Krishna Appala, Senior Research Analyst, Capitalmind Research also stated that the markets are now becoming increasingly stock-specific while the broader indices take a pause. Appala named several key events as factors influencing the current sentiment, including the upcoming US presidential regime change with Donald Trump set to take office in January, and the Indian Union Budget announcement just weeks away. Additionally, the Q3 earnings season carries muted expectations, forcing market participants to adopt a wait-and-watch approach, he believes.

Amid  high uncertainty clouding the market sentiment, Appala suggests a balanced investment strategy that combines the stability and fair valuations of large caps with tactical exposure to profitable, domestic-focused tech companies offers a prudent approach to capturing growth potential while managing geopolitical and policy risks.

Also Read | Rs 9.1 lakh crore wiped out! Sensex crashes 1,200 pts, Nifty in correction territory; all sectors bleed

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