The Indian stock market witnessed a massive drop on Tuesday, December 17, 2024, as the major indexes, Sensex and Nifty 50, suffered heavy losses due to a general sell-off. The Nifty 50 closed 332 points lower at 24,336, while the BSE Sensex was trading 1,064 points lower at 80,684.45. Both domestic and international issues contributed to the downturn in the market mood, leaving investors hesitant.
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Overview of the Market Slump
The Sensex and Nifty 50 declined 1.30% and 1.35%, respectively, during the market downturn. Except for media, all major sectoral indicators witnessed a decline. The total market value of businesses listed on the Bombay Stock Exchange (BSE) fell to ₹257.73 lakh crore, a decrease of ₹2.33 lakh crore. Heavyweights such as Reliance Industries, HDFC Bank, Infosys, Bharti Airtel, and ICICI Bank failed notably. Nevertheless, some equities showed resilience and registered gains, including Tata Motors, Adani Ports, and HUL.
Top 5 Reasons for the Market Crash
1. Pre-Fed Meeting Uncertainty
Investors were cautious ahead of the US Federal Reserve's policy meeting on December 18. A rate cut of 25 basis points is generally expected, but given the resilience of the US economy and ongoing inflation, questions remain over the Fed's 2025 plan. If the dovish rhetoric breaks, markets around the world, including India, could suffer.
2. Chinese Economic Slowdown
Weak economic data from China has raised concerns about a slowdown in demand worldwide. China's industrial output remained stagnant at 5.4% in November, while retail sales grew just 3%, down from 4.8% in October. The slowdown resulted in the Nifty Metal and Auto indexes falling by more than 0.6%, negatively impacting India's metal and automotive industries.
3. Dollar Strength
At 106.77, the dollar index held steady and rose 5% annually. A strong dollar tends to depress market sentiment further by prohibiting foreign buying in Indian stocks and raising lending rates for Indian businesses that take out in dollars.
4. Widening Trade Deficit
Due to a rise in imports and a fall in exports, India's goods trade imbalance widened from ₹27.1 billion in October to ₹37.84 billion in November. As a result, the rupee fell to a record low, pushing up import prices and affecting industries dependent on imported goods.
5. Global Market Trends
As the central bank meetings were approaching, pressure on the global markets was increasing. The Bank of Japan was expected to stick to the current policies, while the Fed was expected to announce a rate cut. The decline in Asian and European markets further increased the sentiment of recession in India.
Sectoral and Stock Performance
Finance, the largest sector on the Nifty50, fell 1.44%, while HDFC Bank declined 1.7% as a result of regulatory concerns. The energy index declined 1.6% as a result of a 1.8% drop in Reliance Industries. Additionally, IT stocks, which are mostly dependent on the US markets, were seen falling 0.5%.
Positively, on December 23, when Zomato was added to the BSE Sensex, it rose 1% in expectation of large inflows.
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