Sensex crashes over 4,000 points this week, Nifty 50 falls below 200 DEMA; 5 factors driving Indian stock market down | Stock Market News

Sensex crash: The Indian stock market ended the current week with hefty losses. The benchmark Sensex plunged over 4,000 points, while the Nifty dropped below its 200-day exponential moving average (DEMA) of around 23,700.

On Friday, December 20, the Sensex dropped 1,343 points to the day’s low of 77,874.59 and the Nifty 50 plunged over 400 points to 23,537.35.565.

Finally, the Sensex closed 1,176 points, or 1.49 per cent, down at 78,041.59. The Nifty 50 settled at 23,587.50, down 364 points, or 1.52 per cent.

Index heavyweights such as TCS, Reliance, Infosys, Axis Bank and HDFC Bank declined 1-3 per cent on Friday, dragging the market benchmark lower.

The Sensex and the Nifty 50 have been falling for the last five consecutive sessions. For the week ended Friday, December 20, the Sensex declined 4,092 points, or 5 per cent. The Nifty 50 also closed the week with a loss of 5 per cent.

What drove the Indian stock market down?

1. US Federal Reserve rate cut outlook

The Fed revised its rate reduction outlook, projecting only two more rate cuts of a quarter-percentage point by the end of 2025 as against the market’s expectations of three or four rate cuts. This seems to have spooked investors.

“The global sentiments have been quite weak post the hawkish guidance of the US Fed. Domestically, we are still waiting for some more concrete ordering and tendering to sort of shape up. So it’s a combination of both global and domestic factors that are driving the market down,” said Pankaj Pandey, the head of research at ICICI Securities.

2. Foreign capital outflows

A hawkish Fed has strengthened the US dollar and bond yields and accelerated the foreign capital outflow.

FIIs (foreign institutional investors) have sold off Indian equities worth over ₹12,000 crore in the last four sessions amid a strengthening dollar, rising bond yields and the prospects of fewer rate cuts by the US Fed next year.

“The FII buying witnessed in early December is getting reversed now with this week’s selling reaching ₹12,229 crores. This change in FII strategy is getting reflected in market trends, too, with large-caps, particularly financials, coming under pressure due to FII selling,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

3. Macroeconomic concerns

Investors also appear concerned about the deteriorating domestic macroeconomic picture. The rupee is at an all-time low of the dollar. Moreover, the country’s trade deficit widened to an all-time high in November.

Overall economic growth is also showing signs of slowing. India’s Q2 GDP prints were the lowest in nearly two years. It showed that Indian economic growth slowed for the third consecutive quarter.

4. Uncertainty over earnings recovery

After weak Q1 and Q2 earnings of Indian corporates, all eyes are on the December quarter (Q3) earnings.

While experts are expecting a recovery from Q3 onwards, the market appears sceptical due to sticky inflation and elevated interest rates.

“Largely, there will be some recovery in Q3 because some of the biggest beaten down sectors, such as oil and gas, would witness some improvement on a quarter-on-quarter basis. We had a fairly decent festive season as well. So, that should lead to better quarter-on-quarter growth numbers,” said Pandey.

5. Poor show of heavyweight sectors

Experts point out that heavyweight sectors such as banking, IT, and financials are not performing as expected, which is keeping the market benchmarks down.

“Big sectors are not performing at this point in time, which is why the markets have been displaying weakness,” said Pandey.

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