indian stock market The decline is showing no sign of stopping. Today the market is in decline for the fifth consecutive day. Due to continued decline in the stock market, the market cap of companies listed on BSE has declined from about ₹450 lakh crore to about ₹448 lakh crore in the last 5 days. Investors have suffered a loss of ₹11 lakh crore in the last five days. After all, what is the reason that the decline in the Indian stock market is not stopping? Let’s take a look at those reasons.
1. US Fed Factor
The US Federal Reserve on December 18 reduced its benchmark interest rate by 25 basis points to 4.25 to 4.50 per cent. However, the estimate of interest rate cut released by the Fed next year was not in line with market expectations. This approach influenced market sentiment around the world. The Fed revised its rate cut outlook and projected only two and a quarter percent rate cuts by the end of 2025, while market expectations were for three or four rate cuts. Due to this, there is a decline in the markets all over the world including India.
2. Withdrawal of foreign investors
Selling by Foreign Institutional Investors (FPIs) continues once again in the Indian stock market. FIIs have sold Indian stocks worth over ₹12,000 crore in the last four sessions amid a strengthening dollar, rising bond yields and low chances of a rate cut by the US Fed next year. Withdrawal of foreign capital is affecting market sentiments. Due to this the market continues to decline.
3. Rupee at record low
On Friday, the Indian rupee reached a historic low of 85.34 per dollar. Let us tell you that weak rupee discourages foreign investors from investing in the Indian market. This reduces their profits when they convert it back into their home currencies, causing foreign capital to flow out and putting further pressure on the markets. This is also affecting the Indian market.
4. Macroeconomic constraints
New concerns have emerged regarding India’s deteriorating macroeconomic picture, which has affected market sentiment. The country’s trade deficit reached an all-time high in November. Apart from this, the economic growth rate has also slowed down. India’s second quarter GDP growth rate was the lowest in almost two years and the third consecutive quarter of decline in growth rate.
5. Uncertainty over improvement in corporate earnings
After weak Q1 and Q2 earnings from Indian corporates, all eyes are on December quarter earnings. According to experts, a good recovery is expected from the fourth quarter itself. However, the picture is still not clear. Its effect is also visible on the Indian market.
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