- By Aditya Pratap Singh
- Mon, 13 Jan 2025 12:46 PM (IST)
- Source:JND
On Monday, the Indian stock market witnessed a slump in its fourth back-to-back trading session, primarily fuelled by a further rise in crude oil prices and the sluggishness of the rupee due to unchanged foreign institutional investors' selling spree.
The benchmark Sensex opened much lower from 76,629.90 than its final closing of 77,378.91, and bang shot down by 800 or even more than 1% to an intraday low of 76,535.24. Nifty 50 also opened at 23,195.40, down from its final close of 23,431.50, slipping by around 250 points, or 1%, to 23,172.70. The selling pressure pervaded almost all market segments with BSE Midcap and Smallcap indices dwindling by no less than 2%.
These four trading sessions of decline have caused a substantial erosion of investor wealth, with the total market cap in BSE-listed companies falling from Rs 430 Lakh Cr a session back to roughly 425 Lakh Cr. Investor wealth has eroded close to Rs 17 Lakh Crore in 4 trading sessions.
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Reasons Behind the Fall Of the Stock Market
Rise in Crude Oil Prices
On Monday, crude oil prices climbed to a three-month peak, largely on US sanctions affecting Russian crude supplies toward China and India, per a Reuters report. Higher crude prices hurt India, one of the major oil-importing nations in the world, with strain on fiscal health, a weaker rupee, and higher capital flight.
Record Low Rupee
The Indian rupee fell by 23 paise to a record low of 86.27 against the US dollar in the opening trade on Monday, primarily due to rising crude oil prices and a firm dollar.
Heavy FPI Sell-Off
Foreign Portfolio Investors sold Indian equities, mounting a selling log that exceeded Rs 21,350 crore till January 10, following sales of Rs 16,982 crore in December. FPIs have been on a selling spree since October 2024, withdrawing Rs 1.14 lakh crore in October and Rs 45,974 crore in November.
US Treasury Yields Surge
The recent broad rise in US Treasury yields along with a rise in dollar value has made global investors more cautious. Other factors, like high valuations of Indian equities, dwindling hopes for US Fed rate reductions in 2025, and poor quarterly earnings, triggered a sell-off by foreign investors.
Pre-Budget Caution
The market has looked ahead for a volatile moment as the Union Budget of 2025 approaches. Analysts said the government is likely to balance its commitment to fiscal prudence with its plans to support consumption and growth. But there was something else that might keep the market on edge: if the much-awaited populist budget were to look just like anything from recent history, that would be disappointing.
US Fed Rate Cuts Less Likely
The stronger US macroeconomic data and fears that Trump's trade policies will accelerate inflation have lowered expectations of a US Federal Reserve rate cut in 2025. Certainly, one thing that pushed the emerging markets, India included, to record highs in the recent past was hope for interest rate cuts by the US.
Diminishing Indicators of Economic Activity
The Indian economy is beginning to show signs of moderation, as the major global agencies lowered their growth projections for the current fiscal year. As per the Ministry of Statistics and Programme Implementation, the Indian economy is expected to grow in real terms by 6.4% for the financial year 2024-25.
