Stock markets fell 1.4 percent on Tuesday as investors unwound positions ahead of the US Federal Reserve meeting on Wednesday. The meeting is expected to provide clues on the trajectory of interest rate cuts. Sentiment was hit by a decline in the rupee, which fell to a new low on Monday on the back of widening trade deficit data.
Analysts said investors will look forward to U.S. retail sales data released later today.
The benchmark Nifyt50 closed at 24,336 points at the end of the trading day, while the BSE Sensex ended 1.3 percent lower at 80,684.45 points. Trading was marked by weak FPI volumes.
Frontline stocks such as HDFC Bank, Reliance Industries and Bharti Airtel bore the brunt of the selling pressure. Of the 50 Nifty companies, only two stocks advanced while 48 companies posted losses. Cipla and ITC were the winners.
Most sectoral indices ended deep in the red, with the Nifty PSU Bank falling the most at 1.82 per cent. The mid-cap and small-cap indices also showed significant erosions of 0.8-0.7 percent, testifying to the market-wide sell-off.
The US Fed is widely expected to cut rates by 25 basis points and while this has already been taken into account, there are concerns about a change in dovish stance in anticipation of higher inflation when Donald Trump takes over. Any easing of monetary policy in the US will benefit emerging markets like India, which are receiving more money flows.
“While markets have priced in a 25 basis point rate cut, the main focus is on Fed Chairman Jerome Powell’s comments on future interest rate movements,” said Vikram Kasat, Head – Advisory, PL Capital, Prabhudas Lilladher.
The biggest losers were the financial sector, led by HDFC Bank, which fell 1.7 percent. The RBI on Monday warned against non-compliance with disclosure norms. RIL, which has a significant weight in the index, further dragged the index down with a decline of 1.6 percent. Shares of IT companies lost half a percentage point.
The volatility index saw a significant spike and analysts warned that more choppy markets were to come. “Volatility is becoming a norm rather than an exception in Dalal Street,” said Devarsh Vakil, Deputy Head of Retail Research, HDFC Securities.
The Nifty50 has fallen 5.7 per cent this quarter and is on track for the biggest decline since the second quarter of 2022, Vakil added.
