Stock Market Crash: Sensex & Nifty Extend Losses To Fall Over 1% Each Ahead Of Fed Meeting; RIL Drags

Indian stock market witnessed a sharp decline for the second consecutive session on Tuesday, December 17, as benchmark indices Sensex and Nifty50 lost more than 1%. Weighed down by heavyweights such as Reliance Industries, Infosys, and HDFC Bank, the decline came amid investor caution ahead of the US Federal Reserve's much-anticipated policy meeting, scheduled for December 18.

The Sensex shed as much as 930 points, hitting an intraday low of 80,781.50, while the Nifty50 fell 262 points to a day's low of 24,375.85. The selloff in financials, oil and gas, and IT stocks kept the indices under pressure throughout the session. However, the broader markets displayed resilience, with the Nifty Midcap and Nifty Smallcap indices each slipping by just 0.06%.

Rising Volatility Ahead of Fed Policy

The India VIX, a measure of market volatility, spiked nearly 6% to 14.8, signalling growing nervousness among investors. Market participants are now focused on the US Federal Reserve's rate outlook as it could influence global liquidity flows and sentiment.

"Globally, markets are awaiting the FOMC (Federal Open Market Committee) outcome on Wednesday. A 25-basis-point rate cut is almost certain and largely factored in. However, the Fed Chair's commentary will be crucial. Any deviation from a dovish stance could impact global markets negatively, though this remains unlikely," noted VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

He further highlighted the impact of India's widening trade deficit, which surged to $37.8 billion in November. "The rising deficit will exert pressure on the rupee, potentially pushing it towards 85 against the dollar. Export-oriented sectors like IT and pharma may benefit from a depreciating rupee, while importers could face higher costs, impacting their stock performance," Vijayakumar added.

Top Movers

Among Sensex constituents, Adani Ports was the sole gainer, while the remaining 29 stocks were trading in the red. HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel, and L&T were the key draggers, exerting maximum pressure on the index.

On the Nifty, Adani Ports, Cipla, Adani Enterprises, and Tata Motors managed to stay positive, while Shriram Finance, Bajaj Finserv, Grasim, Bharti Airtel, and PowerGrid led the losers, falling between 1% and 3%.

Sectorally, financials and oil & gas stocks weighed heavily on the indices. The Nifty Bank, Nifty Financial Services, and Nifty Oil & Gas indices each lost over 1%. Meanwhile, Nifty Auto, Nifty IT, Nifty FMCG, and Nifty Metal dropped more than 0.5% each.

Interestingly, the Nifty Media and Nifty Realty indices bucked the broader market trend, gaining nearly 1% each. Shares of PVR Inox, Zee Entertainment, and Nazara Technologies drove gains in Nifty Media, rising 1-4%.

Broader Market

Despite the benchmark indices declining sharply, the broader markets showed signs of stability. The BSE Midcap and BSE Smallcap indices ended marginally higher, up by 0.1% each, indicating selective investor interest in mid-sized and smaller companies.

Global Cues

Overseas markets reflected mixed sentiment. On December 16, Wall Street's Nasdaq hit a record high, while the S&P 500 also climbed, buoyed by expectations of a rate cut from the Fed. However, Asia-Pacific markets remained mixed, mirroring cautious optimism ahead of the US policy decision.

Apart from the Fed, global investors are also eyeing other key economic developments this week, including the Bank of Japan's policy review on December 19 and China's loan prime rate announcement on December 20.

Technical Outlook

Rajesh Bhosale, Technical Analyst at Angel One, observed that markets are currently consolidating amid muted global cues. "The Nifty failed to sustain gains and retreated near key resistance levels. The 50% Fibonacci retracement level around 24,770 remains a major hurdle, and until we see a breakout above this, consolidation will likely continue. Support is expected around 24,600-24,500," Bhosale said.

He emphasized that global macroeconomic events, such as the Fed meeting, could act as a catalyst for the next directional move in the markets. "Traders should remain vigilant and focus on sectoral outperformers for opportunities in this lacklustre phase," he added.

Near-Term Triggers

Investors are now awaiting two key events:
The US Fed's policy announcement and its commentary on the rate cut trajectory.
Upcoming domestic triggers like the Q3 FY25 earnings season and the Union Budget, will shape market sentiment going forward.

The current decline in the markets, led by heavyweights, reflects caution rather than panic, with analysts expecting consolidation until clarity emerges on global economic policies. Sectors like IT, pharma, and realty may outperform in the near term as investors shift focus to defensive bets amid rising uncertainty.