Closing Bell: Market Ends At A 3-Week Low, Sensex & Nifty Extend Losses Ahead Of Fed Policy Outcome

The Indian stock market witnessed a steep decline for the third consecutive session on Wednesday, December 18, with the benchmark indices Sensex and Nifty hitting a three-week low. Amid weak global cues and domestic concerns, both indices closed deep in the red, dragging investor sentiment further down.

The Sensex plummeted by 502 points, or 0.62%, to end at 80,182, while the Nifty 50 dropped by 137 points, or 0.56%, settling at 24,199. Midcaps and smallcaps followed the downward trend, with the BSE Midcap index slipping 379 points to 58,723. The Nifty Bank index, heavily impacted by financial stocks, fell by 695 points to close at 52,140.

The broader market sentiment was bearish, as evidenced by the market breadth, where declines outnumbered advances with an advance-decline ratio of 1:2. The overall market capitalization of BSE-listed firms shrank to approximately Rs 453 lakh crore, down Rs 6 lakh crore in just three sessions from Rs 459 lakh crore last Friday, December 13.

Most sectoral indices ended in the red, reflecting widespread selling pressure. The Nifty Media index and Nifty PSU Bank index suffered the biggest losses, each tumbling over 2%. Nifty Bank, Financial Services, Private Bank, and Metal indices saw declines exceeding 1% each.

Amid the overall market slump, some sectors managed to eke out gains. Nifty Pharma index rose over 1%, with Dr Reddy's Laboratories, Cipla, and Aurobindo Pharma among the top gainers. Nifty IT also posted mild gains, providing a sliver of support to the market.

ITC gained after announcing January 6 as the record date for its demerger, ending in the green despite the weak market. Tata Motors emerged as the top Nifty loser, shedding 3%. Trent bucked the trend, gaining 2% on healthy trading volumes. NMDC slipped 6% following reports of Karnataka planning to increase iron ore duty. Kfin Tech rose 2% after Jefferies raised its price target to Rs 1,530 per share. Tilaknagar Industries gained 2% amid reports of its interest in acquiring Imperial Blue.

On the listing front, MobiKwik, Vishal Mega Mart, and Sai Life Sciences saw bumper debuts, with their stock prices soaring from 39% to 90%. Meanwhile, Va Tech Wabag dropped 11% after the cancellation of a major Saudi Arabian order.

Reasons for the Market Fall
Global Cues and US Fed Policy Concerns
Investors exercised caution ahead of the US Federal Reserve's policy outcome, scheduled for later on Wednesday. While markets anticipate a 25 basis point rate cut, the focus is on the Fed's updated economic projections and "dot plot," which could offer clues about the trajectory of US interest rates through 2025 and 2026. Persistent inflation and concerns about slowing global growth added to the uncertainty.

Rupee Weakness
The Indian rupee hit a record low of 84.95 per dollar on Wednesday, further dampening market sentiment. A weak Rupee exacerbates foreign capital outflows, pressuring equity markets. Experts predict that the rupee could breach the Rs 85 mark.

Despite the market downturn, some pockets of resilience stood out. Stocks like Trent and Tilaknagar Industries managed to outperform the broader market, and the pharma sector showed strength ahead of the Fed meeting. Meanwhile, the positive listings of MobiKwik, Vishal Mega Mart, and Sai Life Sciences signalled strong investor interest in select IPOs.

However, with the US Federal Reserve policy outcome looming large and continued weakness in the rupee, the Indian market may remain under pressure in the near term. Analysts suggest that while a rate cut by the Fed could offer some relief, the tone of its guidance will be critical in determining global and domestic market trajectories.