Key Points:
- Sensex crash hits markets hard, wiping out ₹7 lakh crore as weak rupee and heavy foreign selling drag indices lower.
- Global jitters rise ahead of the US Fed decision and due to surging Japanese bond yields.
- Rupee pressure and trade deal uncertainty keep volatility high, with analysts expecting choppy markets ahead.
India’s benchmark equity indices fell sharply Monday after the Sensex crash that saw the index dropped more than 600 points and investors lost over ₹7 lakh crore, driven by a weak rupee, foreign selling and global policy uncertainty.
Rupee Slide and Global Cues Hit Sentiment
The Sensex slid 610 points, or 0.71 percent, to close at 85,102.69 after touching an intraday low of 84,875.59. The Nifty 50 dropped 226 points to end at 25,960.55. Mid- and small-cap indices fell nearly two percent during the Sensex crash.
Market capitalisation of BSE-listed companies slipped to below ₹464 lakh crore from ₹471 lakh crore in the previous session. Analysts attributed much of the pressure to the rupee, which hovered near its record low of 90.46 per dollar earlier this month.
“The currency’s persistent weakness is rattling investors despite strong domestic economic data,” said Amrita Shah, an independent market strategist. “It creates uncertainty around foreign flows and import costs.”
The rupee fell to 90.15 per dollar Monday as crude oil prices rose and foreign funds continued to withdraw money from Indian equities.
Fed Rate Decision Sparks Caution
Broader weakness stemmed from caution ahead of the US Federal Reserve’s policy decision scheduled for Dec. 10. Investors are priced for a quarter-point rate cut but appear wary of any hawkish signal.
“If the Fed holds rates steady, the dollar will strengthen and it may deepen pressure on emerging markets already dealing with currency volatility,” said Deepak Soni, head of research at a domestic brokerage.
Foreign institutional investors have been selling since July, offloading more than ₹1.60 lakh crore of equities. In the first five sessions of December alone, they sold stocks worth ₹10,404 crore, adding to the market’s nerves and worsening the Sensex crash.
Trade Deal Uncertainty and Japan Yields Add to Stress
Uncertainty around the India-US trade deal complicated the outlook. A senior US official is expected in New Delhi this week to continue talks, even as Indian officials signal a deal may take longer.
External Affairs Minister S. Jaishankar said over the weekend that the government is committed to protecting workers, farmers and the middle class as trade discussions advance.
Investors were also unsettled by a jump in Japanese government bond yields, which hit multi-year highs Monday. Rising yields raise the risk of a reversal in yen carry trades, a source of funding that supports flows into emerging markets.
“The spike in Japanese yields can force investors to unwind carry trades, and that is a clear negative for markets like India,” said V. K. Vijayakumar, chief investment strategist at Geojit Financial Services.
Analysts expect volatility to persist until corporate earnings for the December quarter offer clarity and trade negotiations with the United States advance. Broader sentiment may remain fragile as long as foreign selling continues and currency pressures linger, especially in the aftermath of the Sensex crash.
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