Indian equity benchmarks ended a four-week rising streak, impacted by a cautious outlook from the U.S. Federal Reserve. The Sensex and Nifty indices closed lower this week, influenced by investors’ concerns over potential monetary tightening by the Fed. Investors reacted to the Federal Reserve’s signals that it might keep interest rates higher for longer to control inflation, which could dampen global economic growth.
This sentiment led to a pullback in several major markets, including India. India’s key stock indices plunged sharply on Friday, falling 1.5% to hit a 21-day low. This capped the worst week for the broad market benchmarks in two and a half years, marked by a deeper selloff in mid-cap and small-cap stocks as well as sharper declines for IT, auto, and bank indices.
The Sensex fell 1,176.46 points, or 1.49%, to close at 78,041.59 points, while the NSE Nifty tumbled 1.52%, or 364.20 points, to end at 23,587.50 points. Trading sentiment remained weak in the backdrop of India’s record trade deficit numbers for November and the U.S. Federal Reserve’s hawkish guidance for 2025, which have spooked emerging markets.
Indian markets tumble on Fed signals
Despite the debacle on Dalal Street, the Indian Rupee (INR) made a surprise recovery, appreciating 10 paise to the Dollar, to close at 85.03. “On a weekly basis, the Nifty registered a massive fall of 4.77%, the highest weekly fall in percentage terms since June 17, 2022,” noted Nandish Shah, senior derivative and technical research analyst at HDFC Securities. “The number of shares declining on Friday outnumbered the advancing shares with the advance:decline ratio at 0.36 on the BSE, the lowest since November 13,” Mr.
Shah said, adding that all the sectoral indices ended in the red, with the Nifty Realty, Nifty PSU Banks, and Nifty IT taking the hardest hit. Shrikant Chouhan, head of equity research at Kotak Securities, said global equity markets witnessed various degrees of sell-off this week. Markets in Brazil were down 10%, Japan 5%, and the S&P-500 4%, in the aftermath of the US Fed’s cautious stance on future interest rate cuts.
Some of the major stocks that took a beating on Friday included Tech Mahindra (down 3.97%), Mahindra and Mahindra (3.60%), IndusInd Bank (3.53%), Axis Bank (3.28%), Tata Motors (2.73%), and State Bank of India (2.44%). The BSE MidCap and SmallCap slumped 2.43% and 2.11%, respectively. Among sectoral indices, the Bankex fell 1.66%, auto was down 2.25%, and IT fell 2.51%.
