Indian equity markets faced a sharp downturn on Tuesday, December 17, as the Sensex and Nifty50 posted significant losses for the second straight session. Weak global cues, a widening trade deficit, and cautious investor sentiment ahead of key events weighed on the benchmarks.
The BSE Sensex plunged 807 points, or 1%, hitting an intra-day low of 80,941.61, while the NSE Nifty50 fell 247.75 points, or 1%, reaching a low of 24,420.5.
As of 11:22 AM IST, Nifty is trading at 24,457.05, down 0.86%, while Sensex is at 81,141.48, down 0.74%.
Despite the broader market showing relative resilience, key index heavyweights dragged the overall sentiment down.
Global Uncertainty Dampens Sentiment
Global factors significantly contributed to market weakness. Investors remained cautious ahead of the US Federal Reserve’s policy meeting on December 18. The Fed’s stance on interest rates remains crucial for markets worldwide, with the potential for fewer rate cuts keeping investor optimism in check.
Adding to the uncertainty, the US Services PMI unexpectedly came in at 58.5, reflecting a stronger-than-expected US economy. While positive for the US markets, this reduces the urgency for aggressive monetary easing, increasing pressure on global equities.
Asian markets mirrored the cautious mood, with key indices across China, Japan, and South Korea falling up to 1%.
India’s Record Trade Deficit Raises Concerns
India’s trade deficit widened to a record $37.8 billion in November, significantly higher than the previous month’s figure of $27.1 billion. This sharp jump in the deficit has put additional pressure on the Indian rupee, which moved closer to the 85 per dollar mark.
The rupee’s depreciation presents a mixed outlook:
- Exporters: Sectors like IT and pharma may benefit from improved export earnings.
- Importers: Industries reliant on imports, such as oil & gas, chemicals, and electronics, could face rising input costs, hurting profitability.
“Sell India, Buy China” Trend Raises Questions
Investor caution also deepened on speculation that foreign institutional investors (FIIs) may shift focus towards Chinese assets. Reports of China potentially increasing its fiscal deficit to 4% in 2025 have sparked expectations of a significant stimulus package.
Such measures may make Chinese markets more attractive for global investors, leading to concerns over fund outflows from Indian equities.
Sectoral and Stock Performance
Index heavyweights contributed heavily to Tuesday’s decline. Stocks like Reliance Industries, Infosys, HDFC Bank, ICICI Bank, and Larsen & Toubro (L&T) were among the biggest drags on the Sensex.
On the Nifty50, only four stocks managed to end in positive territory:
- Adani Ports, Cipla, Adani Enterprises, and Tata Motors.
The other 46 stocks closed lower, with notable losers including Shriram Finance, Bajaj Finserv, Grasim, and Bharti Airtel.
Sectoral Highlights:
- Nifty Bank, Financial Services, and Oil & Gas indices declined over 1%.
- Other sectors like Auto, FMCG, IT, and Metals shed between 0.5-1%.
- Nifty Realty and Media bucked the trend, gaining 1% each and relieving the market.
Technical Outlook
Technical analysts highlighted key support and resistance levels for the Nifty50.
- Support: The 24,500-24,600 zone remains crucial.
- Resistance: The 50% Fibonacci retracement level near 24,770 poses a hurdle for upward moves.
Despite the fall in frontline indices, broader markets showed resilience:
- Nifty Midcap and Smallcap indices ended nearly flat, losing just 0.06% each.
Analysts suggest this indicates selective buying opportunities in the midcap and smallcap segments, which could outperform once volatility subsides.
Investor Outlook
Investor sentiment remains cautious amid global uncertainties, a record trade deficit, and sector-specific challenges. All eyes are now on the US Federal Reserve’s policy decision and its impact on global interest rate movements.
At the same time, resilience in the broader market and sector-specific opportunities provide some hope. Traders and investors are advised to monitor key technical levels and upcoming global developments closely as markets navigate through volatility.
Disclaimer – The information provided in this article is for informational purposes only and should not be considered financial or investment advice. Market data and analysis are based on publicly available sources and are subject to change without notice. Readers are advised to consult with a qualified financial advisor before making any investment decisions. MarketScope Daily does not take responsibility for any losses incurred based on the information presented.
