Stock market crash: Sensex ends over 1000 points lower, Nifty 50 down 1.4% - 5 reasons why
Indian equity indices Sensex and Nifty50 faced significant selling on December 17, with Sensex and Nifty dropping over 1 percent each. Key factors include investor caution ahead of the US Federal Reserve's meeting and concerns over China’s budget deficit impacting Indian markets.
Stock Market Crash: Indian benchmark equity indices Sensex and Nifty50 witnessed heavy selling pressure in trade on Tuesday, December 17, extending losses to the second straight session.
Sensex ended 1064.12 points lower at 80,684.45. Meanwhile, Nifty lost 348 points to settle at 24,320.30.
Meanwhile, in intra-day deals, BSE Sensex shed as much as 1,136 points or 1.4 per cent, to hit an day's low of 80,612.20 while its NSE counterpart Nifty50 lost 365 points or 1.5 per cent to the day's low of 24,303.45.
The benchmarks were dragged by index heavyweights Reliance Industries, TCS, Bharti Airtel, and HDFC Bank, as investors remained cautious ahead of the US Federal Reserve's December 18 meeting.
Broader markets, however, outperformed the benchmark with Nifty Midcap and Nifty Smallcap down 0.6 percent and 0.7 percent, respectively.
Reasons behind stock market crash
Here are the top five reasons behind the stock market crash today:
1. Jitters ahead of Fed meet
Investors chose to stay on the sidelines ahead of the US Federal Reserve's monetary policy outcome on Wednesday, December 18. While expectations are ripe of a quarter-point rate cut from the Fed on Wednesday, uncertainty over the Fed's rate cut path in 2025 persists.
“Globally markets will be looking forward to the FOMC outcome on Wednesday. Markets have already discounted a 25bp rate cut and, therefore, the focus will be on the Fed chief’s commentary. Any departure from a dovish commentary will be a negative from the market perspective. This is only a remote possibility,” said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
2. Fears of FII selling
According to Seema Srivastava, Senior Equity Analyst at SMC Global Securities the market is under pressure amid reports that China is planning to increase its budget deficit from 3 per cent to 4 per cent in 2025, which is likely to pressure the FIIs' inflow in India as the market expects a rise in the stimulus package.
"So, the 'Sell India, Buy China' factor may work against the Indian stock market, and this is the primary reason for selling pressure in the Indian stock market. However, this is mere speculation and hence, chances are high that the market may recover from the lower levels," Srivastava added.
This comes amid FIIs turning net buyers in the Indian stock market after two months of back-to-back selling.
3. Spike in trade deficit
The sharp spike in India’s trade deficit to $37.8 billion in November will put pressure on the rupee pushing it towards 85 to the dollar.
"Exporters like IT and pharma will benefit from the depreciating rupee and for importers the import cost will increase. This will have an impact on their stock prices," said Vijaykumar.
4. Weak global market cues
According to a Reuters report, Asian stocks wobbled as traders braced for a slate of central bank meetings this week. In stock markets, Australian shares rose 0.82%, with Japan's Nikkei down 0.15%. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%.
Futures indicated a subdued opening for European stock markets, with Eurostoxx 50 futures down 0.16%.
5. Technical outlook
“The rise in VIX yesterday is suggestive of caution. This sets up room for extended consolidation with prospects for further slippages. We will keep the 25600 hopes alive though, with the downside marker placed in the 24480-400 region,” said Anand James, Chief Market Strategist, Geojit Financial Services.
Stocks and Sectors: Top gainers & losers
Among Sensex stocks, ITC and Hindustan Unilever were the only constituents in the green while the remaining 28 stocks were trading lower. HDFC Bank, Reliance Industries, Bharti Airtel, TCS and L&T were the top index drags.
Meanwhile, in the Nifty 50 pack, only Cipla and ITC rose while Shriram Finance, Grasim, Hero Moto, Bharti Airtel, and JSW Steel were the top losers.
On the sectoral front, Nifty PSU Bank lost the most, down 1.8 percent followed by Nifty Oil and Gas, Nifty Auto, Nifty Metal and Nifty Financial Services, which shed over 1.5 percent each. Meanwhile, Nifty Bank declined 1.4 percent whereas Nifty FMCG, Nifty IT and Nifty Pharma also fell 04 percent, 0.5 percent, and 0.8 percent, respectively. Nifty Media was flat but the only sectoral index in the green
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