The equity market recorded its biggest weekly fall in more than two years, with the NSE Nifty 50 declining 4.77 per cent and BSE Sensex falling over 4 per cent for the week, marking their steepest decline since June 2022. The selloff intensified on Friday, with the Sensex plummeting 1,176.46 points or 1.49 per cent to close at 78,041.59, while the Nifty 50 ended 364.20 points or 1.52 per cent lower at 23,587.50, marking their fifth consecutive session of losses amid concerns over delayed interest rate cuts by the US Federal Reserve.
The sectoral indices showed significant weakness, with IT dropping 4.4 per cent, Capital Goods falling 5 per cent, and Power declining 5.2 per cent. Only Realty and Pharma sectors showed some resilience, with Pharma gaining 2.3 per cent over the week.
The market’s decline was further amplified by foreign investor outflows. “The dollar’s continuing strength against the rupee has been prompting foreign investors to flee local equities and take shelter in safe haven dollar assets,” noted Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd.
FPI outflows continue
FIIs/FPIs posted a significant net outflow of ₹4,224.92 crore, while DIIs counterbalanced with a net inflow of ₹3,943.24 crore. Clients saw a net outflow of ₹376.23 crore, NRIs experienced a marginal outflow of ₹1.43 crore, and proprietary traders recorded a modest net inflow of ₹326.87 crore.
The selloff was broad-based, with declines outnumbering advances by nearly three to one. Out of 4,085 stocks traded on the BSE, 2,950 stocks declined while only 1,045 advanced, and 90 remained unchanged. The market witnessed 229 stocks hitting their 52-week highs, while 68 touched their 52-week lows.
Equity markets saw significant market capitalisation erosion today. The BSE All India Market Capitalization declined by ₹87,514.48 crore, dropping from ₹45,114,609.13 crore on December 19 to ₹44,239,094.65 crore. Additionally, the top 10 companies’ market capitalization decreased by ₹1,39,034.32 crore, from ₹9,663,620.22 crore to ₹9,524,585.90 crore during the same period.
Technology and banking stocks led the decline, with Tech Mahindra emerging as the biggest loser, falling 3.90 per cent. Other major losers included Axis Bank (-3.51 per cent), IndusInd Bank (-3.47 per cent), Mahindra & Mahindra (-3.24 per cent), and Trent (-2.99 per cent). However, select pharmaceutical companies bucked the trend, with Dr. Reddy’s Laboratories gaining 1.49 per cent, followed by JSW Steel (0.59 per cent), ICICI Bank (0.40 per cent), Nestle India (0.21 per cent), and HDFC Life (0.03 per cent).
The broader markets faced even steeper declines, with the Nifty Next 50 falling 2.72 per cent to 68,702.65 and the Nifty Midcap Select dropping 2.64 per cent to 12,683.15. The banking sector also witnessed significant pressure, with the Nifty Bank index declining 1.58 per cent to 50,759.20.
“Disappointment regarding the slower-than-anticipated rate cuts by the US Fed has adversely affected global market sentiment. This bearish outlook is particularly impacting the domestic market, which is already contending with high valuations & low earnings growth,” said Vinod Nair, Head of Research at Geojit Financial Services.
Technical outlook
From a technical perspective, the market breach of key support levels has raised concerns. “Nifty has violated its 200 days SMA and EMA supports and closed on a weak wicket. The only support which is visible on the chart is the swing low of 23,263, made on November 28, 2024,” explained Nandish Shah, Senior Derivative & Technical Research Analyst at HDFC Securities.
Looking ahead, technical analysts suggest continued caution. Amol Athawale of Kotak Securities indicates that as long as Nifty trades below the crucial 23,800 level, weakness could persist with potential downside targets of 23,400-23,200. However, a breakthrough above this level could trigger a relief rally towards 24,000-24,200. The Bank Nifty faces a critical support at 50,500, with downside risk to 50,300-49,800 if breached. Market participants are also closely watching upcoming U.S. economic data, particularly the Core Personal Consumption Expenditures index, while remaining cautious about potential market impact from Trump’s trade policies expected in mid-January.
The market’s immediate focus remains on upcoming U.S. economic data, particularly the Core Personal Consumption Expenditures index due later in the day, which could influence future rate cut expectations. Traders and investors are advised to maintain caution given the current market dynamics and global economic uncertainties.
