Stock markets tanked in early trade on Tuesday as the benchmark indices Sensex and Nifty dropped around 1% for the second straight session. The decline came amid investor caution ahead of the US Federal Reserve’s meeting scheduled for December 18.
The S&P BSE Sensex fell by 941 points to hit an intra-day low of 80,806.64, while the NSE Nifty50 dropped 274 points to reach its lowest point of the day at 24,394.20.
Despite the decline in the main indices, midcap and smallcap stocks performed slightly better, with both Nifty Midcap and Nifty Smallcap falling only 0.06%.
Key Reasons for Market Crash
US Federal Reserve Meeting:
Global markets are attentively observing the results of the US Federal Reserve’s gathering on December 18. Although markets have already priced in a 25 basis points reduction in rates, investors are eager to hear the Fed chair’s insights on the future trajectory of interest rates. Any unforeseen action or remark might adversely affect worldwide markets.
India’s Trade Deficit:
India’s trade gap for November increased to $37.8 billion, applying stress on the Indian rupee. The rupee is expected to trend toward Rs 85 for each dollar, providing advantages for exporters such as IT and pharmaceutical firms, while raising expenses for those importing goods. This has impacted the stock values of sectors reliant on imports.
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Underperformance of heavyweight stocks:
Major corporations, referred to as index giants, including Reliance Industries, HDFC Bank, and Infosys, pulled the indices downwards. Investors sold off stocks of these prominent firms, resulting in a widespread downturn in the market.
