Sensex plunges 500 points: What's behind today's market decline?
What's the story
India's stock market opened on a negative note today, with the BSE Sensex and NSE Nifty both witnessing sharp declines. The Sensex fell by 483.57 points to trade at 81,861.11, while the Nifty slipped below the 25,200 mark. The downturn comes after two consecutive days of gains driven by a trade deal with the European Union (EU).
Market factors
Profit booking and FII outflows impact market
The current market slump is mainly due to profit booking in major sectors such as IT, auto, and FMCG. This comes after the Nifty and Sensex gained nearly 1% over the last two sessions. The gains were largely driven by positive sentiment following an EU free trade agreement announced on Tuesday, which will see the bloc eliminating tariffs on 90% of Indian goods.
Global influence
US Federal Reserve's rate pause affects emerging markets
The US Federal Reserve's decision to hold rates overnight has also contributed to the market downturn. The pause in the US Federal Reserve's rate cuts makes emerging markets like India less attractive as it supports the dollar and US Treasury yields. This global factor is another reason behind today's decline in India's stock market indices.
Budget impact
Union budget sparks market anticipation
With the Union Budget set to be presented on Sunday, all eyes are on the government's fiscal strategy. The budget is expected to provide clues about economic growth momentum and corporate earnings in India. This has added another layer of complexity to today's market performance as investors await key policy announcements that could shape future market trends.