The benchmark equity indices fell on Wednesday as sustained foreign fund outflows and concerns over proposed changes in the US H-1B visa system weighed on investor sentiment.
Sensex declined 386 points or 0.59 percent to 81,715.63, while the broader Nifty dropped to 25,031.50, down 138 points or 0.55 percent.
Tech Mahindra, Wipro, Tata Motors, HDFC Bank and ICICI Bank were among key laggards, declining up to 2 percent intraday.
Key factors behind market decline
1) Caution due to US visa concerns: Analysts said sentiment was hit after the US Department of Homeland Security proposed a shift to a wage-based system for allocating H-1B visas. The move, intended to prioritise higher-paid candidates, could hurt Indian IT services exporters that rely on cost-effective H-1B visas staffing models for overseas projects.
"On Dalal Street, sentiment remains under pressure as investors grapple with Trump’s 50 per cent tariff hike on India and his steep USD 1,00,000 one-time H-1B visa fee, which disproportionately impacts Indian professionals," Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.
2) FII selling: Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,551.19 crore on Tuesday, further pressuring the domestic market.
3) Global cues: In Asian markets, South Korea’s Kospi and Japan’s Nikkei 225 were trading lower, mirroring overnight weakness on Wall Street.
4) Crude rises: Brent crude futures rose 0.28 percent to USD 67.82 a barrel. Higher oil prices typically raise concerns for India, which is a major importer and sensitive to fluctuations in energy costs.
5) Rupee declines: The rupee slipped 7 paise to 88.80 against the US dollar in early trade, hovering near its all-time low. Market participants said the weakness was driven by persistent fund outflows, tariff-related worries and higher US visa fees.
6) Powell's caution on further easing: Comments from US Federal Reserve Chair Jerome Powell also dampened sentiment. Powell reiterated the need for caution on rate cuts, highlighting risks from both inflation and labour market weakness. Market watchers noted that tighter US monetary policy tends to keep foreign investors away from emerging markets, including India.
"Powell's overnight remarks underscored the central bank's cautious approach," James Kniveton, senior corporate forex dealer at Convera told Reuters. "Powell acknowledged the absence of risk-free policy options, warning that premature easing could entrench inflation whilst excessive monetary restriction might unnecessarily damage employment prospects," he added.
Technical Analysis
Anand James, Chief Market Strategist at Geojit Financial Services, said, "While 25,000 held downsides, upsides were capped by the 25,278 region as pencilled in yesterday. Until we see a close above 25,330, the 24,880–800 trajectory will persist."
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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