The domestic stock market fell by 1.30 percent on Tuesday ahead of the US Federal Reserve’s interest rate decision. The benchmark Sensex sank 1,064 points, or 1.30 percent, to 80,684.45, and the NSE Nifty 50 332 points, or 1.35 percent, to 24,336 on capital outflows by foreign portfolio investors (FPIs). fell in the middle.
All sectors came under selling pressure, with metals, autos and energy stocks the worst hit. While broader indices also ended in the red, their losses were relatively moderate. The large-cap segment bore the brunt of the selling pressure, while the broader indices showed relative resilience.
FPIs withdrew Rs 6,409 crore from the cash market on Tuesday.
Analysts said globally, markets are waiting for the US FOMC results on Wednesday. Markets have already discounted the 25-basis point (bp) rate cut and hence, the focus will be on the Fed chief’s remarks. “Any departure from the Dovis comments would be negative from a market perspective. It is only a remote possibility. US services PMI strengthening at 58.5 percent indicates a resilient economy, which bodes well for the market,” an analyst said.
IT, pharma industries may benefit from weaker rupee
India’s trade deficit widened to $37.8 billion in November, pushing the rupee to 85 against the dollar. A devaluation of the rupee will benefit exporters such as IT and pharma, but will increase import costs. This will affect their share price, he said.
“Broad pessimism prevails across all sectors ahead of key policy decisions from the US Fed, BoJ, and BoE. While the market has already factored in a 25-bp cut from the US Fed, it remains alert for any hawkish signals,” Geojit Financial Services head of research Vinod Nair said. The BoJ and BoE are expected to maintain current rates for the year. Meanwhile, the rupee has depreciated to new lows, and a record-high trade deficit is adding to the pressure. FPI outflows continue due to rising US debt yields and a strong dollar, further contributing to the prevailing pessimism.
The rupee depreciated to a fresh low of 84.93 against the dollar on Tuesday and closed flat at 84.90 on Tuesday due to a widening of India’s trade deficit and sell-off in domestic equities. Markets were focused on the US Fed’s final policy decision for the year scheduled for December 18, 2024.
“While a 25-bp rate cut has already been factored in, further commentary and speculation will be key. A dovish tone could push the dollar index lower, providing relief to the rupee. However, any uncertain or hawkish comments could strengthen the dollar and leave participants bearish on the rupee. The rupee is expected to range between 84.75 and 85.05,” said Jatin Trivedi, Research Analyst, Commodities and Currencies, LKP Securities. said
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