The markets are under severe selling pressure in the afternoon trade. The Sensex has fallen nearly 800 points, down nearly 1% and the Nifty is trading below 26,000, down over a per cent. The cut across the small and midcap end of the market is even more severe, with the Nifty Midcap Index and the BSE Small Cap Index clocking a 2% plus fall each.
The move is particularly striking, coming on the back of a host of positive news for the markets, like the RBI rate cut, liquidity infusion, and the strong GDP print. Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments, outlined that “from the leading indicators, it is clear that about 15% earnings growth is achievable in FY27. This is positive for the market. However, there are strong negatives, too, which can impact the market. Sustained depreciation of the rupee has been forcing Foreign Institutional Investors (FIIs) to sell in the market continuously. Another major factor is the spike in Japanese bond yields, which can trigger another bout of reversal of the yen carry trade. In brief, there is potential for high volatility.”
4 reasons why the market is falling
The sentiment across the market has taken a turn for the worse. Here are key factors impacting the downward move in the markets
#1 Small and midcaps see sharp cut
The small and midcaps have been under severe selling pressure. The investors seem to be seeing a shift in the investment sentiment ahead of the upcoming holiday season. They are sticking to large-cap names and paring positions in the small- and midcap segments of the market.
#2 Investors eye Fed decision later this week
The fall in the market also reflected the cautious sentiment globally as investors awaited the US Federal Reserve’s policy meeting later this week. The US Central Bank is expected to lower interest rates. The European markets too are under significant selling pressure in early trade.
#3 Rupee weakness
The continued weakness in the rupee is also seen as a key factor impacting sentiment. The Indian rupee declined 0.2% versus the US dollar to 90.1650, pressured by likely portfolio outflows and a persistent depreciation bias that kept it pinned below the 90-per-dollar mark.
#4 FII outflows worry investors
Another big concern for the markets is the continuous outflows. December has begun with sustained selling by FIIs on all days of the first week. In the first week ending on December, 5 FIIs have sold equity for Rs 10401 crores in the cash market. According to Geojit’s Vijayakumar, FIIs are selling now primarily because of the sharp depreciation of the rupee by around 5 per cent this year.”