Sensex, Nifty decline for third session ahead of Fed policy outcome; banks, auto struggle, pharma gains

The broader market also succumbed to the selling pressure, with the BSE Midcap and BSE Smallcap indices both slipping by 0.4 percent.

The Sensex and Nifty kicked off the session largely unchanged but quickly dipped on December 18 as investors remained cautious ahead of the U.S. Federal Reserve's highly anticipated policy decision to gauge the path of future rate cuts. While financials, auto, and energy stocks bore the brunt of the sell-off, pharma stocks managed to defy the trend and secure gains.

At 10 AM, the Sensex was down 246 points or 0.3 percent at 80,437, and the Nifty was down 72 points at 24,264. About 1,413 shares advanced, 1,744 shares declined, and 116 shares remained unchanged.

Ravi Diyora, Director of Research at Kunvarji Group, noted that while the market is expecting a 25 basis point rate cut from the Fed, the real focus will be on its guidance. "The Fed policy decision is expected to include a hawkish rate cut," said Ravi Diyora, Director of Research at Kunvarji Group. "While the market anticipates a rate cut, the guidance by Fed is likely to remain hawkish. This is causing global markets to consolidate," he said.

"The focus now is on the Fed's guidance and economic outlook, which will shape the market's expectations for GDP growth, inflation, and interest rates in 2025  and the guidance by Fed Chair Jerome Powell will be crucial for the market," Diyora added.

The CME FedWatch Tool indicates that there's a 97 percent change in the FOMC reducing the target rate by 25 basis points to 4.25-4.50 percent from the current 4.50-4.75 percent.

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The Indian market has faced pressure over the past two sessions, due to continued FII selling and mounting uncertainty ahead of the Federal Open Market Committee (FOMC) meeting outcome. In the last two days alone, FIIs have offloaded Indian stocks worth Rs 6,689 crore.

Adding to the pressure on the market was a weakening rupee, which has been affected by a rising trade deficit, which surged to $37.84 billion in November. However, Amit Pabari, Managing Director at CR Forex, remains optimistic and said that the rupee's downside appears to be well-contained, thanks to a flurry of IPO activity and foreign institutional investments (FIIs) being net buyers so far in December.

Two major IPOs—Vishal Mega Mart and MobiKwik—debuted on Dalal Street today. Vishal Mega Mart made a stellar debut on the NSE, surging 33.33 percent above its IPO allotment price of Rs 78. Meanwhile, One Mobikwik Systems listed at Rs 440, delivering an impressive 58 percent premium over its issue price.

Turning to sectoral performance, the PSU Bank index was one of the biggest decliners, dropping nearly 1 percent, with Bank of Baroda and SBI contributing to the fall, losing 1.5 percent and 0.5 percent, respectively. The Nifty Bank and Nifty Private Bank indices also slipped by 0.7 percent.

The Nifty Auto index declined 0.6 percent, weighed down by selling pressure in Tata Motors and Maruti Suzuki.

Also Read | IPO rush in December hits 17-year high with nearly Rs 25,000 cr fund raising

Meanwhile, the pharma index bucked the trend and gained over 1 percent led by Sun Pharma, Dr Reddy's, and Cipla.

Amongst individual stocks, VA Tech Wabag stood out as shares of the water treatment firm tanked 12 percent after announcing that the tender for Saudi Arabia's 300 MLD mega seawater desalination plant, won by the company, has been cancelled due to internal administrative procedures. Shares of Shoppers Stop rose 4 percent after a large trade worth Rs 236 crore took place on the exchanges.

The broader market also succumbed to the selling pressure, with the BSE Midcap and BSE Smallcap indices both slipping by 0.4 percent.

From a technical perspective, Diyora said that the PCR (Put-Call Ratio) suggests an oversold condition in the Indian market and indicates a potential recovery from lower levels in the second half of the trading day.

Ruchit Jain, Vice President at Motilal Oswal said, "In the derivatives segment, we've seen some short buildup from FIIs over the last couple of trading sessions, which is largely event-driven."

He expects Nifty 50 to find support around the 24,150–24,200 range. "If this level is breached, the next support will be around 23,800. On the upside, immediate resistance levels are at 24,600 and 24,800," he added.

On the Nifty 50 index, Tata Motors, Power Grid, Bharat Electronics, Adani Ports, and Maruti Suzuki were the biggest losers, each falling by 1-2 percent. In contrast, Dr. Reddy's, Cipla, Sun Pharma, Trent, and Tata Consumer emerged as the top gainers, rising between 0.7 and 2.5 percent.

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