The Indian stock market faced significant losses on Monday, marking its fourth consecutive day of declines as global volatility heightened. The Sensex saw a sharp drop of over 600 points, reaching an intraday low of 76,535, while the Nifty50 slipped below the 23,200 mark, reflecting growing investor concerns.
The market sell-off was largely triggered by a stronger-than-expected US jobs report and continued uncertainties surrounding global economic conditions. The US nonfarm payrolls report for December revealed the addition of 256,000 jobs, well above the anticipated 160,000. This data has reduced the likelihood of aggressive rate cuts by the US Federal Reserve in 2025, a move that could further strengthen the US dollar and put pressure on emerging market currencies, including the Indian rupee.
The US dollar index approached 110, and the rupee fell to a historic low of 86.39 against the dollar. This sparked fears of continued foreign institutional investor (FII) outflows from the Indian markets. In fact, FIIs have withdrawn over $4 billion from Indian equities this month, following a substantial $11 billion outflow in the previous quarter. The ongoing uncertainty regarding US monetary policy, along with concerns about President-elect Donald Trump’s economic strategies, has contributed to bearish market sentiment.
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In addition to the US economic data, rising oil prices have added to inflation concerns. Brent Crude surpassed $81 per barrel, further unsettling investors. Experts predict that volatility will continue in the short term, with market downturns expected to persist. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the strong US job data, while positive for the economy, has dampened market expectations of rate cuts, leading to a negative impact on the stock markets.
Looking ahead, Emkay Global has suggested that domestic markets may remain under pressure until March. However, they expect some stabilization from April, as corporate earnings improve and FII selling subsides. The brokerage has set a conservative Nifty target of 25,000 for 2025, with small and mid-cap stocks expected to outperform. ICICI Securities also shared similar views, citing concerns over the impact of Donald Trump’s policies and the upcoming Budget 2025 on market sentiment.
