5 Reasons for Stock Market Crash - December 17
Indian benchmark indices, Sensex and Nifty50, faced significant selling pressure on Tuesday, December 17, continuing their decline for the second consecutive session.
The BSE Sensex dropped by 1,109 points, or 1.35%, reaching an intra-day low of 80,639.61, while the NSE Nifty50 saw a loss of 344.65 points, or 1.4%, hitting a low of 24,323.6. The downturn was primarily driven by key heavyweights such as Reliance Industries, Infosys, and HDFC Bank, as investors remained cautious ahead of the US Federal Reserve's meeting scheduled for December 18.
While the broader markets outperformed, with Nifty Midcap and Nifty Smallcap indices falling only 0.6% each, the major indices experienced substantial losses.
Key Reasons Behind the Stock Market Decline:
1. Jitters Ahead of the Fed Meeting
Investors adopted a wait-and-see approach ahead of the US Federal Reserve's monetary policy announcement on Wednesday, December 18. While markets expect a 25-basis-point rate cut, uncertainty about the Fed's future rate cut strategy in 2025 remains. Geojit Financial Services' Chief Investment Strategist, V K Vijayakumar, noted that while a dovish stance is anticipated, any deviation from this could negatively impact markets.
2. Concerns Over FII Selling
Seema Srivastava, Senior Equity Analyst at SMC Global Securities, cited concerns that China’s plans to increase its budget deficit for 2025 could impact foreign institutional investors (FIIs) in India, potentially leading to reduced inflows. The "Sell India, Buy China" sentiment could pressure the Indian market, though there remains speculation that the market could recover.
3. Trade Deficit Spike
India's trade deficit surged to $37.8 billion in November, which could place additional pressure on the rupee, pushing it towards 85 to the dollar. While exporters like IT and pharma may benefit from a weaker rupee, the increased import costs could negatively affect stocks of import-dependent companies.
4. Weak Global Market Sentiment
Asian stocks showed mixed performance as markets prepared for a series of central bank meetings. The MSCI index for Asia-Pacific stocks outside Japan fell by 0.3%, while Japan’s Nikkei slid by 0.15%. European markets were also expected to open weak, with Eurostoxx 50 futures down 0.16%.
5. Technical Factors
A rise in the Volatility Index (VIX) indicated increased caution in the market, suggesting that the market could face further consolidation with possible downward movement. Geojit’s Chief Market Strategist, Anand James, highlighted that the downside risk remains in the 24,480-24,400 range, despite holding out hope for a recovery to 25,600.
Disclaimer: The views and recommendations expressed here are those of individual analysts and broking firms and do not necessarily reflect views of Sakshi Post. Investors are advised to consult with certified experts before making any investment decisions.
