Sensex slips 4000 pts this week, Nifty below 23600: Why markets are falling

Market crash today: The 30-share Sensex tumbled 1,176.46 points, or 1.49 per cent, to end Friday's trading session at 78,041.59

Market crash today: The Indian benchmark indices Sensex and Nifty fell for the fourth straight session today, December 20, 2024. The BSE Sensex tanked 4,092 points or 4.98 per cent this week and touched the week's low at 77,875 and the National Stock Exchange (NSE) Nifty fell 1,181 points or 4.77 per cent to the week's low at 23,537.

 

The 30-share Sensex tumbled 1,176.46 points, or 1.49 per cent, to end Friday's trading session at 78,041.59. Similarly, the NSE Nifty50 ended down by 364.20 points, or 1.52 per cent, to settle at 23,587.50. 

Here are few reasons why the markets tanked this week:

FII selling 

"The FII buying witnessed in early December is getting reversed now. This change in FII strategy is getting reflected in market trends, too, with largecaps, particularly financials, coming under pressure due to FII selling," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. 

 

Foreign Institutional Investors (FII) in the week, till Thursday, sold Rs 12,230 crore worth of equities in the Indian markets.

 

Weakness in global markets

Asia-Pacific stocks traded in red with Japan's Nikkei down 0.29 per cent, China's mainland CSI 300 down 0.45 per cent, Shangai down with a negative bias, and Hong Kong's Hang Seng down 0.16 per cent. 

 

Similarly, there was a blood bath in the European markets as well with Germany's DAX down 1.13 per cent, United Kingdom's FTSE down 0.73 per cent, and the French stock exchange index CAC down 1.17 per cent.  

Rupee depreciation 

The rupee breached the psychologically significant 85-per-dollar mark, and government bond yields rose on Thursday following the US Federal Reserve’s meeting, which signalled a more cautious pace of future interest rate cuts, unsettling financial markets, according to dealers. Several Asian currencies performed worse than the rupee.

 

Ambareesh Baliga, an independent market analyst, believes the weakness in the Indian rupee is denting market sentiments. A weak rupee or a stronger US dollar, he said, makes Indian equities less attractive for foreign investors.  

   US Fed hawkish commentary   After cutting the interest rate by 25 basis points (bps), the US Federal Reserve Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation, remarks that showed policymakers are starting to reckon with the prospects for sweeping economic changes under a Trump administration. In 2025, two rate cuts are now expected instead of earlier projection of four.   This also dented market sentiments dragging the global stocks along with the Indian benchmark indices   Valuation concerns  As per Goldman Sachs, weak earnings growth and high valuations are likely to keep the Indian market range-bound over the next three months.  

Donald Trump to swear-in as US President 

Baliga further said worries around President-elect Donald Trump's swear-in as the US President can be one reason for volatility in the markets.  

 

Trump will sworn in as president of the United States today, January 20, ushering in his second term in office.

 

"Trump's comeback to the White House is worrying the investors as he is expected to bring major changes related to raising tariffs," said Baliga.

 

Trump has threatened to slap tariffs of at least 10 per cent on goods from China and to impose levies of 25 per cent on products from both Mexico and Canada, prompting importers like Reynolds to import early to avoid higher costs that are often passed on to consumers, as per reports.