Sensex falls over 800 points: What's driving today's market crash
What's the story
India's equity benchmarks, the Sensex and Nifty, witnessed a significant decline today. The Sensex fell by as much as 800 points while the Nifty dropped below the 26,000 mark. The fall was largely due to profit booking in small and midcap shares, which experienced significant declines, with indices falling over 2% in intra-day trade. Persistent foreign fund outflows also contributed to the negative investor sentiment.
Market overview
Market performance and investor sentiment
At 1:35pm the Sensex was down by 802.91 points or 0.94% to trade at 84,909.45 while the broader Nifty fell to 25,917.40, down by 269.05 points or 1.03%. InterGlobe Aviation and Bharat Electronics were among the major laggards in the Nifty50 pack with losses of up to 7%. On the other hand HDFC Life Insurance Company and Tech Mahindra gained up to 1%.
Investor strategy
Investor caution ahead of US Fed meet
Investors are adopting a cautious approach ahead of the US Federal Reserve's two-day meeting starting December 9. Devarsh Vakil, Head of Prime Research at HDFC Securities, said "Investors positioned cautiously ahead of the upcoming FOMC meeting, additional inflation releases, and year-end portfolio adjustments." He also noted that central banks in Australia, Brazil, Canada and Switzerland are also scheduled to meet this week but no policy changes are expected outside the Fed.
Market trends
Selling pressure on small and midcap shares
Small- and mid-cap shares faced heavy selling pressure today as investors booked profits, dragging several stocks down. The Nifty Smallcap100 index fell for the fifth straight session, declining over 2% in intra-day trade. It has lost over 4% in the last five sessions while the Nifty Midcap100 index also slipped by about 2%. Ajit Mishra from Religare Broking Ltd said "Initially the fall was largely restricted to midcap and smallcap names but now it's cascading to largecaps too."
External factors
Persistent FII outflows and weak rupee impact market
Foreign institutional investors continued their selling spree, offloading equities worth ₹438.90 crore on Friday, the seventh straight session of net outflows. Siddharth Maurya from Vibhavangal Anukulakara said "The fall is mainly due to a nervous worldwide atmosphere." He added that uncertainty over rate cuts and weakness in Asian markets contributed to the decline. The Indian rupee (INR) also weakened by 16 paise against the US dollar amid higher crude prices and continued foreign fund withdrawals.