The stock market continued its downward trend on Friday, December 20, marking the fifth consecutive day of losses. The Nifty index has fallen by approximately 10% from its recent all-time highs, and the Sensex dropped by about 1300 points from its daily peak. Most sectoral indices were in the red, indicating a broad market downturn. The Nifty IT index performed the worst, despite strong results from Accenture, with the index falling by over 2%.
By 2:30 PM, the Sensex was down 895 points, or 1.13%, trading at 78,320, while the Nifty had fallen 271 points, or 1.2%, to 23,680.
Foreign Institutional Investors Lead the Sell-Off
Ajit Mishra, Senior Analyst at Religare Broking, explained that the major reason for today’s market decline was heavy selling by Foreign Institutional Investors (FIIs). So far this week, FIIs have sold approximately ₹12,320 crore worth of shares, with ₹4,224.92 crore sold on December 19 alone. This selling spree is reminiscent of October, when FIIs sold shares worth over ₹1 lakh crore.
Fed’s Hawkish Stance Weighs on Market Sentiment
Mishra also pointed out that the U.S. Federal Reserve has signaled a more aggressive stance on economic policy in 2025, which has further dampened market sentiment. Previously, the market expected three to four rate cuts in the upcoming year, but now there is uncertainty about whether any cuts will happen at all.
Profit Booking Amidst Uncertainty
Experts also believe that profit booking is another significant factor behind the market decline. Following the Fed’s policy announcement, investors are finding it hard to gauge the market’s direction, leading many to opt for locking in profits. Both the Nifty midcap and smallcap indices also saw declines of up to 2% today. Mishra advised investors to be more selective, choosing stocks with reasonable valuations and strong revenue visibility, especially in segments where valuations remain high.
Rupee Hits Historic Low Against Dollar
In the forex market, the Indian Rupee faced significant pressure, hitting a historic low of 85.1050 against the U.S. Dollar on Friday. So far this year, the rupee has depreciated by 2% against the dollar. Increased trade deficit data from November has also contributed to weakening market sentiment.
In conclusion, the stock market faces several challenges, including foreign investor sell-offs, a hawkish stance from the U.S. Federal Reserve, and ongoing uncertainty in global financial markets. Investors are advised to stay cautious, focus on value-based investments, and be selective in choosing stocks moving forward.
