Ahead of the US Federal Reserve's interest rate decision on Wednesday, investors remained cautious, causing the Sensex and Nifty to drop as much as 1.47 percent on December 17. Weak global cues, a declining rupee, and strong selling pressure in IT, FMCG, metal, and finance equities all affected market sentiment.
The BSE Sensex fell 1,064.12 points, or 1.30 percent, to close at 80,684.45, marking the second consecutive day of declines. It fell 1,136.37 points, or 1.39 percent, to 80,612.20 during the day. At 24,336 the NSE Nifty fell 332.25 points, or 1.35 percent. Nifty Bank, Nifty Energy, and Nifty Infra were among the sectoral indices that had a 1-1.5 percent decline.Important causes of the market meltdown today:
1. US Fed jitters: The US Federal Reserve's interest rate announcement on Wednesday is being watched by investors with great attention. Although a 25 basis point rate drop has already been priced into the market, investors will be watching Fed Chair Jerome Powell's remarks for advice for the upcoming year. According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, "any divergence from dovish commentary will be detrimental for markets."
2. Rupee hits all-time low: On December 17, the Indian rupee fell 1 paisa to a new all-time low of 84.92 versus the US dollar due to weak domestic stocks and outflows of foreign funds. According to Anil Kumar Bhansali, Head of Treasury and Executive Director of Finrex Treasury Advisors LLP, "the rupee fell in NDF (Non-Deliverable Forward) markets after a record trade deficit for November, mainly due to increased gold buying."
3. Absence of new FII purchasing: Market sentiment was tempered by a dearth of new FII purchasing. The cautious sentiment was heightened on Monday when FIIs liquidated stocks valued at Rs 279 crore. Ajit Mishra, Senior Vice President-Religare Broking's Research, stated, "It appears that FIIs are still selling today, as the midcap and smallcap indices are still holding ground."
4. Investing in blue-chip stocks: The 30-share Sensex pack's largest laggards included titans such as Reliance Industries, Bharti Airtel, Nestle, Larsen & Toubro, Bajaj Finserv, HDFC Bank, JSW Steel, and Titan.
5. Bank of Japan policy meeting raises warning: The board will decide whether to raise short-term interest rates from the current 0.25 percent at the Bank of Japan's (BOJ) final policy meeting of the year, which is scheduled for December 18–19. The Fed's decision, which is generally expected to involve rate reduction, comes before the BOJ's.
A top Japanese government official told Reuters that the BOJ should wait to raise interest rates until the economy has recovered a little further. "As sentiments remain cautious ahead of the US Fed and Bank of Japan's interest rate decisions, we expect markets to consolidate within a broad range," stated Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd.
Worldwide markets
Tokyo quoted in positive territory, but Hong Kong, Shanghai, and Seoul all saw lower trading. The majority of Wall Street's indices ended Monday higher.
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