Sensex fell 800 points, 8 main reasons behind the bloodshed for the fourth consecutive day
New Delhi, January 13, Selling in the Indian stock market continues for the fourth consecutive session amid rising crude oil prices, weakening rupee and huge foreign investment inflows.
The Sensex opened at 76,629.90 and closed at 76,535.24, down over 800 points or 1 per cent. Nifty opened at 23,431.50 points and closed at 23,172.70, down more than 250 points or 1 per cent. Good sales were seen in the mid and small cap segments. BSE midcap and smallcap indices fell by up to 2 percent.
By 12.40 pm, the Sensex was at 76,762, down 617 points or 0.80 per cent, while the Nifty was at 23,220, down 211 points or 0.90 per cent.
The total market capitalization of BSE listed companies in the last session stood at Rs. 430 lakh crore to approximately Rs. 422 lakh crores. Investors have suffered a loss of about Rs 20 lakh crore in the last four trading sessions.
Why is the Indian stock market falling?
Here are eight reasons for the fall in the Indian stock market:
1. Increase in oil prices
Oil prices hit a three-month high early Monday, Reuters reported. Oil prices have risen on expectations that US sanctions will impact China and India.
“The Biden administration on Friday imposed its own sweeping package of sanctions targeting Russian oil and gas revenues in an effort to give Kiev and the Donald Trump administration leverage to reach a deal for peace in Ukraine,” Reuters reported.
The increase in crude oil prices will have a negative impact on India’s economic health. Because it is one of the largest importers. Rising crude oil prices have given a fresh boost to investor sentiment amid rising inflation concerns and signs of slowing economic growth. This will put additional pressure on the domestic currency. The flow of foreign capital increases.
2. Rupee reaches new low
The Indian rupee fell 23 paise to a low of 86.27 against the US dollar in early trade on Monday due to higher crude oil prices and a stronger dollar. The US dollar hit a 14-month high after Friday’s strong payroll report.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, traded 0.22 percent higher at a two-year high of 109.72. 10-year US bond yields rose. It reached the level of 4.76 percent in October 2023.
3. Uncertainty over Trump’s trade policies
Donald Trump will take office next Monday (January 20). There is speculation that he may propose higher tariffs on many countries including India, which is likely to spoil the sentiment.
“A second Trump administration could significantly reshape Asia’s economic landscape, particularly through its trade policies and protectionism. A Trump second term will bring new opportunities for Southeast Asia and emerging markets, but export- Oriented economies and industries that rely on international talent.” ” said Ross Maxwell, head of strategy operations at VT Markets Global.
4. Heavy selling by FPIs
Foreign portfolio investors (FPIs) sold Rs 16,982 crore in December till January 10. Indian equities worth over Rs 21,350 crore were sold. They have been in sale mode since October last year. In October Rs. Indian stocks worth Rs 1,14,445 crore were sold in November, while Rs 45,974 crore were withdrawn from the Indian stock market.
Foreign investors sold heavily amid disappointing quarterly results due to rising US bond yields, a strong US dollar and low expectations of a US Fed rate cut this year.
5. Budget 2025 Precautions
Amidst the fluctuations in the market, all eyes are on the Union Budget 2025. Experts expect the government to exercise fiscal prudence and announce measures to boost consumption and boost growth. Experts have warned that if the budget remains as populist as the previous budget, it will put pressure on the market and it will fall further.
After last year’s populist budget, no major growth is expected before this year’s budget. Since the last budget was a populist budget after the BJP came to power for the third time in last year’s general elections, we expect the Union Budget 2025 to be more favorable for the middle class, keeping in mind the lower consumption trends this year, especially rural demand. Will provide some relief. ,” said fund manager Divam Sharma, co-founder of Green Portfolio.
6. Decreased expectations of US Fed rate cut
Expectations for a rate cut by the US Federal Reserve in 2025 have diminished amid strong US macroeconomic data and concerns that Trump’s trade policies will fuel inflation.
The start of the US Fed rate cut cycle was the main reason why emerging markets like India reached new record highs in September last year. Minutes of the US Fed’s last policy meeting indicated that policymakers were wary of the pace of inflation in the world’s largest economy.
According to Reuters, job growth in the US unexpectedly accelerated in December. The Labor Department’s Bureau of Labor Statistics said nonfarm payrolls increased by 256,000 jobs last month. Economists polled by Reuters had predicted an increase of 160,000 jobs. Estimates range from 1,20,000 to 2,00,000.
7. Fear of soft returns in the third quarter
Experts expect only modest recovery in select sectors in view of the sluggish Q1 and Q2 earnings season. He expects that there will be significant improvement only by the fourth quarter and the pressure on the market will remain for a long time.
There is going to be a major decline in ‘Q3’ also. There may be some improvements in some areas. But there is no possibility of a complete reversal. “A significant improvement has been seen since Q4,” said Ajit Mishra, SVP Research, Religare Broking.
He expressed concern that Q1 and Q2 have performed poorly and Q3 will be a hat-trick. “As the rupee weakens and the dollar strengthens, we expect export-oriented sectors to perform better,” said Green Portfolio’s Sharma.
8. Slow growth
There are signs of weakness in the Indian economy. Several major global organizations have revised their country growth forecasts for the current year. Since the sustainability of India’s growth rate is an important factor in attracting investors to the Indian stock market, domestic and foreign investors are concerned.
India’s gross domestic product (GDP) is expected to grow by 6.4 per cent in the financial year 2024-25, the Ministry of Statistics and Program Implementation (MOSPI) said in an official release on January 7. This fell to a four-year low compared with growth of 8.2 per cent in fiscal year 2024-25.
Factors such as slowdown in growth, devaluation of the Indian currency and outflow of foreign investment have accelerated the growth. Meanwhile, media reports indicate that international financial services firm HSBC has downgraded Indian equities to ‘overweight’ from ‘neutral’ amid concerns over high valuations and slow growth.
International Monetary Fund (IMF) MD Kristalina Georgieva has predicted that India’s economy is likely to be “slightly weaker” in 2025.
(Disclaimer: The above opinions and recommendations are those of individual analysts, experts, brokerage firms and not of Hindustan Times. (We advise investors to consult certified professionals before making any investment decisions.)
