Investors have witnessed a challenging period on Dalal Street as both the S&P BSE Sensex and NSE Nifty 50 experienced a sharp decline in recent trading sessions.
The Sensex dropped over 526 points or 0.79 percent, reaching 66,274.33, while the Nifty saw a decline of 144.85 points, landing at 19,756.55. This marks the third consecutive session of decline for the benchmark indices, and broader markets also showed a similar trend, with all indices in the red.
While many analysts had expected some correction in the domestic markets following their record-breaking performance, the steeper decline has raised concerns about further consolidation.
Deven Mehta, a research analyst at Choice Broking, noted that “the overall market sentiment hinges on Nifty maintaining levels within the range of 19,800 to 19,950.”
Over the past five sessions, the Sensex has declined by over 2 percent, with the Nifty down by 1.93 percent, indicating a possibility of further consolidation in the domestic markets.
Several factors have been cited as contributing to the recent decline in the Sensex and Nifty. These include profit booking, heightened geopolitical tensions, higher crude oil prices, a rebound in the US dollar, and concerns about reduced foreign investments due to the US Federal Reserve’s potential rate hike.
The US Federal Reserve decided to maintain interest rates at their current levels but adopted a more stringent monetary policy stance to address inflation concerns. The Fed’s updated quarterly projections suggest that another interest rate hike is possible this year, with a peak range of 5.50 percent to 5.75 percent. This has had repercussions on stock markets worldwide, including India.
Jayden Ong, Senior Market Analyst, APAC at Vantage, explained that the Fed’s more hawkish stance has led to a rally in the US dollar index and exerted downward pressure on precious metals and risk assets in global markets, indirectly affecting the Indian market.
Naresh Tejwani, Abans Group, highlighted that while the US Fed’s decision to defer the rate hike was expected, it might keep global markets on edge. Inflation in the US remains high, and economic indicators show little signs of slowing down, which has led to expectations of further rate hikes before year-end.
These factors, along with the uncertainty created by the US Federal Reserve’s monetary policy decisions, have contributed to the recent loss of momentum in the Indian benchmark indices.
