The Indian stock market witnessed a sharp downturn on Friday, December 13, with both the Sensex and Nifty 50 indices falling over 1%. The selloff extended across segments and hit midcap and smallcap indices even harder, which declined nearly 2% during intraday trading.
The Sensex dropped 1,200 points (1.5%) to 80,082.82, while the Nifty 50 tumbled by 370 points (1.5%) to close at 24,180.80, according to Mint. Major stocks like Reliance Industries, HDFC Bank, and SBI were among the biggest losers, each sliding by over 1%. Midcap and smallcap indices recorded steeper losses, further intensifying the market’s rout.
5 Reasons for the Market Decline
- Global Cues: Rising Dollar and Bond Yields
Increased U.S. bond yields and a strengthening dollar led to capital outflows from emerging markets, including India. Longer-dated U.S. Treasury yields recorded their largest weekly rise this year, denting risk sentiment globally.
- Persistent Inflation Concerns
U.S. inflation data showed signs of stickiness, with the Consumer Price Index (CPI) rising to 2.7% in November, the sharpest increase in seven months. Additionally, producer prices in the U.S. saw their largest jump in five months, raising fears of a slower path to monetary easing by the Federal Reserve.
- Foreign Institutional Investor (FII) Outflows
Foreign investors pulled out Rs 4,500 crore from Indian equities in the last two days, pressured by high valuations, a stronger dollar, and global uncertainties. Analysts believe FIIs may continue selling on market rallies.
- Technical Breakdown
The Nifty 50 breached its 50-day exponential moving average (DEMA) support level of 24,300, signaling potential further downside. Sectors like metals, pharma, FMCG, and PSU stocks faced significant selling pressure.
- Cautious Sentiment Ahead of U.S. Fed Meeting
The Federal Open Market Committee (FOMC) meeting on December 17-18 could lead to a 25-basis-point rate cut. The focus will be on Fed Chair Jerome Powell’s commentary regarding inflation and growth.
