The Sensex and Nifty both experienced significant declines in early trade on Friday, falling by over 400 points and 120 points respectively, as metal stocks took a hit and foreign institutional investors continued to offload equities.
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The Indian stock market witnessed a sharp decline in early trade on Friday, with both benchmark indices – the Sensex and Nifty – slumping due to a pullback in metal stocks, foreign fund outflows, and weak global cues.
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The 30-share BSE Sensex plummeted by 412.8 points, settling at 80,877.16, while the NSE Nifty tanked 129.85 points to 24,418.85 in the initial hours of trade.
Among the blue-chip stocks of the Sensex, metal stocks bore the brunt of the sell-off, with Tata Steel and JSW Steel registering notable losses. Other major laggards included IndusInd Bank, Axis Bank, Mahindra & Mahindra, Larsen & Toubro, State Bank of India, and Reliance Industries. On the other hand, stocks such as Bharti Airtel, Nestle, Adani Ports, and Hindustan Unilever saw gains during the early trade session.
The negative sentiment was exacerbated by foreign institutional investors (FIIs), who offloaded equities worth ₹3,560.01 crore on Thursday, according to exchange data. This continued outflow of foreign funds has been a key factor in dragging the market lower. Analysts believe that given India’s high stock valuations, FIIs are likely to continue their selling spree, especially at every market rise.
Despite the bearish trend in the market, there are some positive factors that may provide support in the near term. A key tailwind is the recent decline in India's retail inflation, which fell to 5.48 per cent in November, entering the Reserve Bank of India’s (RBI) comfort zone. The decline was largely attributed to easing food prices, creating potential room for a rate cut at the RBI’s rate-setting panel meeting in February under the new leadership of Governor Sanjay Malhotra.
However, the country's industrial production (IIP) growth showed signs of slowing down, with a 3.5 per cent year-on-year growth in October, primarily due to poor performance in sectors like mining, power, and manufacturing. This further dampened investor sentiment.
Commenting on the market outlook, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, mentioned, “In the near term, the market faces both a headwind and a tailwind. The headwind is the resumed selling by FIIs, which sold stocks worth ₹3,560 crore yesterday. Given the high valuations, FIIs are likely to sell more during every market rise. The tailwind supporting the market is the decline in inflation.”
Global markets also contributed to the negative sentiment, with Asian indices like Tokyo, Shanghai, and Hong Kong trading lower, while Seoul posted a marginal gain. Wall Street had ended in the red the previous day, further fuelling concerns.
In commodities, the global oil benchmark, Brent crude, slipped by 0.04 per cent to USD 73.38 a barrel.
On Thursday, the Sensex had fallen by 236.18 points or 0.29 per cent, closing at 81,289.96. The Nifty also closed down by 93.10 points or 0.38 per cent at 24,548.70, marking a continuation of the downward trend in the stock market.
As per PTI reports, the continued volatility in the markets suggests that the upcoming interest rate decision by the Federal Reserve on December 18 could further heighten market uncertainty, keeping investors on edge.
(With inputs from PTI)
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