The Sensex and Nifty declined up to 1.47 percent on December 17, as investors stayed cautious ahead of the US Federal Reserve’s interest rate decision on Wednesday. Heavy selling pressure in finance, metal, FMCG, and IT shares, coupled with weak global cues and a falling rupee, weighed on market sentiment.
Falling for the second day in a row, the BSE Sensex tanked 1,064.12 points or 1.30 per cent to settle at 80,684.45. During the day, it slumped 1,136.37 points or 1.39 percent to 80,612.20. The NSE Nifty tumbled 332.25 points or 1.35 percent to 24,336. Sectoral indices like Nifty Bank, Nifty Energy, and Nifty Infra fell 1-1.5 percent each.
Key factors behind today’s market crash:
1. US Fed jitters: Investors are closely watching the US Federal Reserve’s interest rate decision on Wednesday. Markets have already priced in a 25 basis points rate cut, but investors will monitor Fed Chair Jerome Powell’s commentary for guidance on the coming year. “Any departure from a dovish commentary will be negative for markets,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
2. Rupee hits all-time low: The Indian rupee dropped 1 paisa to a new lifetime low of 84.92 against the US dollar on December 17, weighed down by foreign fund outflows and weak domestic equities. “The rupee fell in NDF (Non-Deliverable Forward) markets after a record trade deficit for November, mainly due to increased gold buying,” said Anil Kumar Bhansali, Head of Treasury and Executive Director, Finrex Treasury Advisors LLP.
3. Lack of fresh FII buying: A lack of fresh buying by Foreign Institutional Investors (FIIs) dampened market sentiment. FIIs sold equities worth Rs 279 crore on Monday, adding to the cautious mood. “It seems FIIs are continuing their selling today, as midcap and smallcap indices are still holding ground,” said Ajit Mishra, Senior Vice President - Research, Religare Broking.
4. Selling in blue-chip stocks: Heavyweights like Reliance Industries, Bharti Airtel, Nestle, Larsen & Toubro, Bajaj Finserv, HDFC Bank, JSW Steel, and Titan were among the biggest laggards from the 30-share Sensex pack.
5. Bank of Japan policy meet prompts caution: The Bank of Japan (BOJ) will hold its final policy meeting of the year on December 18-19, where the board will decide on raising short-term interest rates from the current 0.25 percent. The BOJ decision follows the Fed’s outcome, which is widely anticipated to involve rate cuts.
“It’s desirable for the BOJ to hold off on raising rates until the economy recovers a bit more,” Reuters quoted a senior Japanese government official. “We expect markets to consolidate within a broad range as sentiments remain cautious ahead of the US Fed and Bank of Japan’s interest rate decisions,” said Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd.
Global markets
Elsewhere in Asia, Seoul, Shanghai, and Hong Kong traded lower, while Tokyo quoted in positive territory. On Wall Street, indices ended mostly higher on Monday.
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