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The Indian equity markets experienced a significant downturn on Friday, with the Nifty 50 index falling 1.4% to 24,180.80 and the Sensex dropping 1.141.26 points (1.4%). This decline followed a period of consolidation and represents a breach of the key 24,200 level for the Nifty 50. Major losers included Shriram Finance, Tata Steel, JSW Steel, IndusInd Bank, and Hindalco, while index heavyweights like HDFC Bank, Reliance Industries, Infosys, Axis Bank, and L&T contributed significantly to the negative trajectory. Several key sectoral indices, including metals, PSU banks, realty, pharma, and oil & gas, also faced considerable pressure. This market fall wasn't an isolated incident; it reflects a broader global trend.
Pawan Parakh, Fund Manager at Geojit Financial Services, attributed the decline to muted global cues, noting that most markets worldwide were experiencing similar downward pressure. While the sharp correction in equity markets has lessened, persistent growth concerns are preventing investors from aggressively entering the market. The article highlights three key factors driving investor worry: the underperformance of Asian markets, rising inflation in the US, and the resumption of selling by Foreign Institutional Investors (FIIs).
The decline in Asian markets mirrored the overnight falls in US markets. Japan's Nikkei 225 was down 1.5%, the Shanghai Composite fell 1.64%, and the Asia Dow slipped 0.27%. This interconnectedness highlights the global nature of market fluctuations and the immediate impact of events in one region on others. The US producer price index (PPI), a key inflation indicator, rose by 0.4% last month, exceeding expectations of a 0.2% increase. This higher-than-anticipated inflation fueled concerns about the US economy's trajectory and potentially impacted investor confidence globally. The increased inflation adds to already existing concerns about economic growth and its implications for various markets, leading to a risk-averse sentiment among investors.
Further exacerbating the situation is the renewed selling by FIIs. While FIIs have been net buyers in December, their overall sales in 2024 have totaled Rs 2.78 lakh crore, with Rs 1.6 lakh crore sold in October and November alone. This selling pressure adds to the downward momentum, indicating a lack of confidence in the market's short-term prospects from significant foreign investors. The October performance of the Nifty 50, which saw a decline of 6.2%, serves as a stark reminder of the volatility in the market and the potential for significant corrections driven by factors such as FII activity. The combined effect of negative global cues, inflationary pressures, and FII selling has created a confluence of negative factors weighing heavily on investor sentiment, resulting in the observed market fall.
The current market situation underscores the interconnectedness of global financial markets and the significant impact of macroeconomic factors on investor behavior. The rise in US inflation, underperformance in Asian markets, and the resurgence of FII selling all contribute to a climate of uncertainty, discouraging aggressive investment. While the situation in December shows some improvement with FIIs buying, the long-term implications remain uncertain. Investors are advised to carefully monitor macroeconomic indicators and global market trends before making any investment decisions. The interplay between global events and domestic factors highlights the complexity of market dynamics and the challenges in accurately predicting future trends. Further analysis is needed to ascertain whether this downward trend is a temporary correction or the beginning of a more sustained downturn.
Source: Why are markets falling? Here are 3 factors worrying investors at the moment - Market News