Sensex Sinks 1,300 Points in 3 Days: What's Dragging the Market Down?

The Indian stock market experienced a sharp decline, with the Sensex falling over 1,300 points in three sessions. This downturn is attributed to several factors.

The Indian stock market continued to wobble for the third straight session on Wednesday, leaving investors nervous as benchmark indices slid deeper into the red. The Sensex fell another 275 points to close at 84,391, while the Nifty 50 dropped 82 points to settle at 25,758. Broader markets suffered sharper cuts, with midcaps and smallcaps slipping 1.08% and 0.58%.

In just three sessions, the Sensex has shed 1,321 points and the Nifty has lost 1.6%. Here's what experts say is spooking the markets.

1. India–US Trade Deal Uncertainty

The biggest cloud over the market right now is the lack of clarity on the India–US trade agreement. Negotiations are underway in New Delhi, but a breakthrough looks unlikely this month as the US enters the holiday season.

"Trade talks will happen this week, but a deal looks unlikely in December," said Pankaj Pandey, Head of Research at ICICI Securities. His comments reflect investor worries that any delay could prolong volatility.

Concerns deepened after US President Donald Trump hinted at additional tariffs on Indian rice, sparking fears of a broader trade dispute.

2. Weak Rupee Adding Pressure

The rupee's persistent weakness is another major drag. It closed at 89.96 against the US dollar on Wednesday amid heavy dollar demand from corporates and foreign investors.

"If the RBI is allowing some depreciation to offset the impact of tariffs, then further weakness cannot be ruled out," Pandey noted. A weaker rupee often fuels inflation concerns and hurts foreign investor sentiment.

3. Retail Investor Fatigue Setting In

Despite recent all-time highs, the rally hasn't felt rewarding for many investors. A large chunk of NSE 500 stocks, especially mid and smallcaps, are still trading well below their peaks.

"There's fatigue because the rally has been narrow, driven mainly by a few large-cap stocks," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. As retail investors grapple with underperforming portfolios, they are increasingly turning cautious.

4. Global Caution Ahead of US Fed Policy

Markets worldwide are treading carefully ahead of the US Federal Reserve's policy decision. Though a 25-basis-point rate cut is widely expected, any hawkish commentary from the Fed could unsettle global equities—including India's.

5. Rising US & Japan Bond Yields Triggering Outflows

A sharp jump in bond yields in the US and Japan has also shaken investor confidence. Higher yields in Japan threaten the viability of the yen carry trade, a popular strategy among global investors. If unwound, it could lead to accelerated outflows from emerging markets like India.

Market experts believe volatility is likely to persist through December until corporate earnings begin to roll in and the India–US trade equation becomes clearer.