Nifty50 tumbles over 1% amid broad sell-off: Key factors impacting market
Domestic equity benchmarks dropped more than one per cent each on Tuesday amid a broad-based sell-off on Dalal Street. Heavyweights like Reliance, HDFC Bank, Bharti Airtel, ICICI Bank and TCS pulled the indices lower. Read on to learn about various factors influencing the market now.
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Domestic equity benchmarks suffered sharp losses amid a broad-based sell-off on Tuesday amid caution among market participants globally ahead of a key rate decision due this week. The Sensex ended 1,064.1 points, or 1.3 per cent, to end at 80,684.5 while the Nifty50 settled at 24,336, shedding 332.3 points, or 1.4 per cent, for the day. During the session, the 30-scrip index plunged as much as 1,136.4 points while the broader barometer lost 364.8 points to hit 80,612.2 and 24,303.5 on the downside, respectively.
Among index heavyweights, HDFC Bank, Reliance, Bharti Airtel, ICICI Bank and TCS put the maximum pressure on the main gauges throughout the session.
Barring Cipla and ITC, which closed 0.1 per cent higher each, all Nifty50 constituents ended weaker. Shriram Finance, Grasim Industries, Hero MotoCorp, Bharti Airtel, JSW Steel, IndusInd Bank and Hindalco, falling between 2.3 per cent and 5.3 per cent, were the top losers in the blue-chip basket.
Meanwhile, the rupee hit an all-time low against the US dollar before settling nearly unchanged for the day.
Here are some of the key factors impacting Dalal Street now:
All Eyes on Fed: The Federal Reserve is scheduled to announce its six-weekly rate decision on December 18. The much-anticipated event may not only mark the US central bank's third rate cut of the year but also offer more clarity about its future rate decisions.
Intermittent FII Selling: Although foreign institutional investors (FIIs) have emerged net purchasers of Indian shares in six out of the total 11 sessions so far this month, many analysts fear that it may be a while before they switch to a sustainably bullish mode on Dalal Street. However, domestic institutional investors (DIIs) continue to fill the gap created by foreign institutional selling, a trend also witnessed in almost two straight months of back-to-back FII outflows in the market starting late September. As of December 16, FIIs and DIIs have net bought shares to the tune of Rs 11,428 crore and Rs 4,438 crore for the month so far, respectively, according to provisional exchange data.
Rupee Not Out of Woods Yet: The rupee hit a record low of 84.92 against the US dollar during Tuesday's session, the latest in a series of lows over the past few days. While a depreciating rupee is positive for export-heavy businesses like IT companies, it increases the costs of sectors relying heavily on commodities like metals and electronics. Additionally, companies with significantly higher levels of overseas borrowings face higher repayment costs due to rupee depreciation.
Slowing Economic Growth: Official data released last month showed that the country's GDP growth slowed to a seven-quarter low of 5.4 per cent in the July-September period. Although many experts believe that GDP growth may have bottomed out for now, some fear it may have a prolonged impact on business activities.
Inflation Under Control? November's consumer inflation reading came in at 5.48 per cent, in line with most economists' estimates and within the upper end of the RBI's medium-term tolerance range. Many economists believe that easing inflation gives the RBI room to cut the benchmark interest rate in its February policy review.
Rate Cut Expectations: Also preventing a further sell-off in the market are market-wide expectations of an imminent rate cut in February. In its December policy review, the RBI's Monetary Policy Committee (MPC) decided to keep the repo rate on hold at 6.5 per cent while deciding to lower the cash reserve ratio (CRR) by 50 bps in two tranches in a move set to infuse liquidity in the system.
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