Sensex, Nifty drag despite inflation cheer: US Fed policy, FII selling among key factors keeping D-St in check

The intraday sell-off in Indian share market followed weakness across Asian markets.

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26 Aug, 2025 12:21

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Indian equity markets staged a recovery by mid-morning on Friday, December 13, paring steep intraday losses even as broader concerns kept indices mildly in the red. Despite easing inflation, markets grappled with global uncertainties, foreign investor selling, and persistent pressure on key sectors, overshadowing the CPI cheer.

At 12:12 pm, BSE Sensex was down 63 points or 0.1 percent at 81,227, while NSE Nifty slipped 32 points to 24,516. Earlier in the day, the indices had plunged sharply, with the Sensex falling as much as 1,100 points or 1.4 percent. Although most sectoral indices remained in the red, they recovered significantly from their intraday lows.

Key factors dragging the market

Renewed FII selling: Foreign institutional investors (FIIs) offloaded Rs 4,572 crore worth of Indian equities over the past two sessions, dampening market sentiment. According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, "Given the high valuations in India, FIIs are likely to sell more at every market rise."

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Global market jitters: The intraday sell-off in Indian equities followed weakness across Asian markets, which posted steep losses amid a stronger dollar, rising US Treasury yields, and continued skepticism over China’s economic revival. The lack of clarity in China’s stimulus plans further weighed on metal stocks, dragging the Nifty Metal index down by 2.1 percent.

US Fed policy concerns: The upcoming US Federal Reserve policy meeting on December 18 has added to market uncertainty. Prashanth Tapse, Senior VP (Research) at Mehta Equities, noted that "The Federal Reserve's upcoming interest rate decision has dampened sentiment, as markets brace for potential surprises."

Currency pressure: The Indian rupee hit a new low of Rs 84.88 per dollar on Thursday, pressured by a strong dollar, FII outflows, and higher crude oil prices. Currency experts predict the rupee may touch 85 against the US dollar by the end of December, adding to concerns over imported inflation.

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Persistently high inflation: While India’s CPI inflation eased slightly to 5.48 percent in November from a 14-month high of 6.2 percent, it remained above the 5 percent mark for the third straight month. Analysts highlighted the continued uptrend in core inflation and its potential impact on earnings and growth. Hitesh Suvarna of JM Financial said, “Despite marginal easing, core inflation remains elevated, supporting RBI’s forecast for Q3 inflation at 5.7 percent.”

Market outlook

Market experts believe the current weakness could persist as indices consolidate. Gaurang Shah of Geojit Financial Services suggested that "Nifty is likely to trade within a range of 24,200–24,750 as markets take time to digest recent volatility."

Despite near-term challenges, some optimism remains due to declining inflation and expectations of a shallow rate-cut cycle in both India and the US in 2025. However, experts cautioned that rising inflationary pressures and geopolitical uncertainties could limit gains in the short term.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.