The Indian stock market faced a steep decline on Tuesday, with the benchmark indices plummeting nearly 1% amid investor concerns surrounding the US Federal Reserve’s upcoming meeting and India’s widening trade deficit. The S&P BSE Sensex tumbled by 941 points to hit an intra-day low of 80,806.64, while the NSE Nifty50 shed 274 points, reaching its lowest level of the day at 24,394.20.
While the broader indices bore the brunt of the sell-off, midcap and smallcap stocks performed slightly better, with both the Nifty Midcap and Nifty Smallcap indices slipping only 0.06%.
Key Factors Driving the Market Crash
- US Federal Reserve Meeting
Investor sentiment remains cautious ahead of the US Federal Reserve’s meeting scheduled for December 18. Global markets are anticipating a 25 basis points rate cut, but attention is fixed on Fed Chair Jerome Powell’s comments regarding the future trajectory of interest rates.
Any deviation from expectations or hawkish remarks could hurt global market sentiment. Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “Global markets are waiting for the US Federal Reserve’s comments. If the Fed takes a less supportive stance, it could hurt market sentiment. However, this is unlikely.” - India’s Trade Deficit Surge
India’s trade deficit widened significantly to $37.8 billion in November, adding pressure on the rupee, which is edging closer to Rs 85 per US dollar. While the weaker rupee provides a tailwind for exporters such as IT and pharmaceutical companies, import-dependent sectors are reeling under rising costs. This sentiment weighed heavily on stock prices across industries. Dr Vijayakumar added, “India’s widening trade deficit is also a major concern. A weaker rupee will help exporters like IT and pharma firms, but for importers, it increases costs. This has started to reflect in stock prices.” - Weak Performance of Heavyweight Stocks
Leading index heavyweights, including Reliance Industries, HDFC Bank, ICICI Bank, Infosys, and Bharti Airtel, dragged the Sensex and Nifty lower as investors engaged in broad-based selling. Out of the 30 stocks on the Sensex, 29 ended in the red, with Adani Ports being the sole gainer.On the NSE Nifty50, only four stocks – Adani Ports, Cipla, Adani Enterprises, and Tata Motors – managed to hold their ground in green territory. The biggest laggards included Shriram Finance, Bajaj FinServ, Grasim Industries, Bharti Airtel, and PowerGrid.
Sectoral Impact: Banks, Oil & Gas Lead the Decline
Sectoral indices reflected the widespread weakness in the market. The Nifty Bank, Nifty Financial Services, and Nifty Oil and Gas indices each registered losses of over 1%, while sectors like Nifty Auto, FMCG, IT, and Metal declined by 0.5% or more.
However, a few sectors bucked the trend. The Nifty Media and Nifty Realty indices managed to gain nearly 1% each, supported by selective buying in smaller and niche stocks.
Mixed Trends in FMCG Sector
The FMCG sector saw contrasting trends during the session. Smaller stocks like Umang Dairies, Nakoda Group of Industries, and LT Foods posted gains ranging between 1% and 5%, reflecting selective buying interest. In contrast, major FMCG players such as Emami, Patanjali Foods, Britannia Industries, and Colgate-Palmolive faced notable selling pressure, with declines exceeding 1%.
Investor Sentiment and Outlook
The overall sentiment in the market was clouded by uncertainty, as concerns over global interest rates, domestic macroeconomic issues, and the rupee’s depreciation loomed large. Analysts pointed out that investors are likely to remain cautious until the outcome of the US Fed meeting is clear.
Adding to the cautious tone, heavy selling in large-cap stocks indicates that institutional investors might be hedging their portfolios in light of rising global risks.
Meanwhile, midcap and smallcap segments showed resilience, suggesting that selective buying opportunities are still being explored in the broader market.
Market Breadth: Heavy Losses in Key Indices
The day’s sell-off impacted the entire breadth of the market, with:
- Sensex: 29 out of 30 stocks closed lower, with Adani Ports being the only gainer.
- Nifty50: 46 stocks ended in the red, while Adani Ports, Cipla, Adani Enterprises, and Tata Motors managed to gain marginally.
Among the top losers of the day, shares of HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel, and Larsen & Toubro dragged the indices significantly lower.
The Indian stock market’s sharp decline on Tuesday highlighted heightened investor concerns over global and domestic headwinds. While focus remains on the US Federal Reserve’s upcoming decision, India’s widening trade deficit and the rupee’s weakness continue to cast a shadow over import-driven industries. Market participants are likely to tread carefully in the coming days, awaiting clearer signals from global central banks and domestic economic indicators.
For now, the cautious sentiment and sell-off in heavyweight stocks have set a somber tone, leaving investors to navigate an uncertain path as the year comes to a close.