There was a ruthless bloodbath on the Indian stock markets on Monday. The BSE index Sensex tumbled 1,258.12 points, or 1.59%, to settle for the day at 77,964.99, while the NSE index Nifty 50 shed 388.7 points, or 1.62%, to close at 23,616.05. However, no one who knew the present share market scenario was shocked. It was almost written on the wall.
FPIs Sold Shares Worth Rs 4,285 Crore In 3 Sessions
The Foreign Portfolio Investors (FPI) sold domestic equities worth Rs. 4,285 crore in just the first three trading sessions of the Year 2025.
Stronger US Dollar
The US Dollar surged strongly and registered a robust increase on December 31, 2024, as the Indian Rupee slipped to a record closing low of 85.6150 against the greenback. It was the fall for the consecutive sixth day against the US currency.
Buoyed by the increase of the power of the US Dollar, most of the FPIs decided to offload their Indian equities to earn some extra money.
US Treasury Yield
The other important reason was the higher yield of the US Treasury bonds
The yield on US 30-year bonds climbed to 4.85%, the highest rate since late 2023.
As the US Treasury market is gearing up to issue fresh government debt for $119 billion, the yield on 30-year US bonds climbed to 4.85%, the highest rate since late 2023.
Why the US-based FPIs working in India would not exploit this situation and sale their portfolios?
Q3 Results
The Indian stock market is also going to be on a rollercoaster ride this week because as many as 36 companies, including the TCS, IREDA, Mobikwik, and DMart, are expected to declare the corporate results of the third quarter of the current financial year.
Also Read: Year Ender 2024:Indian Capital Markets- Record Highs, Volatility, Resilience Amid Tumultuous Period
However, market analysts are not very optimistic of the results due to subdued demands and lesser than expected GDP growth rate, they apprehend a further slump in the market sentiments.
Surge Of HMPV
The surge of new human metapneumovirus or the HMPV has added to the bearish sentiments of the BSE and the NSE, pushing the Sensex and the Nifty 50 further down. It may further damage the already vulnerable market.
Market analysts believe this trend is likely to further strengthen at least for some time to come.
US Federal Reserve
The US Federal Reserve is most likely to hold its next meeting on the interest rates on January 28-29, 2025.
Finanical experts believe, the Fed is most likely to slash the interest rate at which it lends money to commercial banks (repo rate in India) by 50 basis points and dring it down to 4%.
It is expected to bring the rate to 3% by the end of the current year and so a 50-point cut is not unexpected.
Also Read: Indian Economy In 2024: Resilient Growth Amid Inflationary Pressures, Record Forex Reserves
Higher interest rates negatively impact earnings and stock prices except for the financial sector. The reverse is also true.
So if the Fed cuts interest rates, it will encourage the FPIs and FIIs and they may end up putting more money in domestic stock, pushing the market up.
Punitive US Tariffs On Indian Exports
Donald Trump will take oath as the US President on January 20, 2025. He has already threatened India with punitive tariffs on its imports in that country, making it highly uncompetitive.
Some of the Indian exports may lose the US market. It may damage not only those companies or the companies in the export sector, but damage the sentiments of the entire share market.
Though the “America First” policy may come back to hit the US economy hard in the long run, it will damage the Indian economy and the capital market immediately.
So, the Indian stock market will remain in the doldrums for the time to come. It should not be expected to perform brilliantly now, though it may go on a see-saw experience for some time.
