Nifty Sensex Extend Losses on Hawkish Fed Commentary, Wipe Out Rs 10.5 Lakh Crore in Four Sessions: Stock Market Crash

The Indian stock market has been in turmoil this December, dashing investor hopes for a year-end rally. With Nifty and Sensex slipping for four straight sessions, the losses have amounted to a staggering Rs 10.5 lakh crore in investor wealth. Market experts attribute the downturn to hawkish commentary from the US Federal Reserve, which sparked global sell-offs.

Overview of Nifty and Sensex Performance

The frontline indices experienced sharp declines:

• Nifty 50 gave up the 24,000 mark, closing at 23,952, down 247 points or 1%.
• Sensex crashed 964 points to settle at 79,218, reflecting a 1.2% decline.

Interestingly, the Nifty 50 showed a modest 1.8% return over the past month and six months, highlighting stagnant growth despite earlier momentum.

Impact on Investor Wealth

Investor wealth took a massive hit:

• Total market capitalization of BSE-listed firms dropped from Rs 452.6 lakh crore to Rs 446.5 lakh crore.
• The cumulative four-session loss is over Rs 10.5 lakh crore, signaling widespread market panic.

Why Did the Indian Markets Fall?

Hawkish US Fed Commentary

The US Federal Reserve maintained a tough stance on inflation, dampening expectations for aggressive rate cuts.

Inflation Concerns in the US

The Fed revised its inflation outlook for 2025, increasing projections to 2.5% (up from 2.1%), reducing hopes for rate flexibility.

Global Market Trends

Markets worldwide reacted sharply, with US indices like the S&P 500 and Nasdaq witnessing a 3% decline.

Key Highlights of December 19 Market Performance

Nifty and Sensex Data

• Sensex dropped nearly 1,000 points intraday.
• Nifty 50 slipped to 23,870 before recovering slightly.

Sectoral Performance

• Banking, metal, and IT stocks led losses.
• Broader markets, including Nifty Midcap 100 and Smallcap 100, also declined marginally.

The Hawkish US Fed Commentary

The US Fed cut its key interest rate by 25 basis points, as expected. However, the revised dot plot projections disappointed:

• Only two rate cuts are expected in 2025.
• Earlier projections hinted at 75-100 basis points of easing.

This hawkish stance triggered panic, as markets had priced in more aggressive rate cuts.

Impact on Global Markets

Global equity markets mirrored Wall Street’s reaction:

• Japan, South Korea, Hong Kong, and China all slipped into the red.
• The US Dollar Index surged to a two-year high of 108.3.

Sectoral Analysis

Banking Sector

Banking stocks faced heavy selling pressure due to rate concerns and foreign capital outflows.

IT Sector Under Pressure

• Heavyweights like Infosys and LTIMindtree fell sharply.
• US rate policies increase costs for IT clients, reducing demand for exports.

Pharma Stocks: The Outliers

Amid the broader sell-off, pharma stocks bucked the trend:

• Dr Reddy’s Labs, Cipla, and Lupin gained 1-4%.
• Pharma stocks benefited from defensive buying as investors sought safer assets.

The Role of Foreign Institutional Investors (FIIs)

Foreign investors sold Indian equities worth Rs 8,000 crore in recent sessions. Rising bond yields and a strong US dollar have further pressured FIIs to exit Indian markets.

The Rupee Hits a Record Low

The rupee fell to 85.3 per dollar, marking a historic low. A weaker rupee:

• Discourages foreign investment.
• Contributes to inflationary pressures, hurting investor confidence.

Macroeconomic Challenges due to Stock Market Crash

India’s trade deficit widened to an all-time high of $37.84 billion, sparking fresh economic concerns. Additionally, GDP growth has slowed for three consecutive quarters.

What Should Investors Do Now after Stock Market Crash?

Amid volatility, experts suggest:

• Focusing on defensive sectors like pharma and FMCG.
• Avoiding panic selling and staying invested for the long term.

The sharp fall in Nifty and Sensex is driven by global cues, particularly the hawkish US Fed stance. While short-term volatility is likely to persist, investors are advised to stay cautious and adopt a long-term approach.

---

FAQs

1. Why did the stock market crash on December 19?
   The market fell due to hawkish commentary from the US Federal Reserve and global economic concerns.
2. Which sectors were hit the hardest?
   Banking, IT, and metal sectors faced the most significant declines.
3. Which stocks gained despite the market fall?
   Pharma stocks like Dr Reddy’s Labs and Cipla rose due to defensive buying.
4. What should investors do during market volatility?
   Investors should focus on defensive sectors and avoid panic selling.
5. How did the rupee perform during the crash?
   The rupee hit a record low of 85.3 per dollar, adding pressure to the markets.