Monday's stock market drop was significant. Sensex and Nifty fell 1%. Strong profit-taking in small- and mid-cap stocks, FII selling, a weak rupee, and uncertainty ahead of the US Fed meeting lowered market confidence.
Sensex Nifty Fall Reasons: On Monday, December 8, the stock market witnessed heavy selling. Investors engaged in strong profit booking, especially in small-cap and mid-cap stocks, while several large-cap stocks also faced pressure. Along with this, continuous FII selling and increased uncertainty in the market ahead of the US Fed's decision intensified. By 2:30 PM, the Sensex had fallen by 799.80 points to 84,912.57, and the Nifty had dropped by 288.55 points to 25,897.90. In the Nifty 50, InterGlobe Aviation, Bharat Electronics, and ETERNAL were the biggest losers, while HDFC Life and Tech Mahindra saw minor gains. Here are the 5 biggest reasons behind such a significant market decline...
Increased Caution Before US Fed Meeting
Caution was observed in global markets ahead of the US Federal Reserve's policy meeting on Wednesday. According to market experts, investors are on alert due to the FOMC meeting, inflation data, and year-end adjustments. The central banks of several countries will also hold meetings in the coming week.
Heavy Profit Booking in Small-cap and Mid-cap
Today's decline was most prominent in small and mid-cap stocks. The Nifty Smallcap 100 fell by about 2%. The Nifty Midcap 100 also dropped by nearly 2%. According to experts, large investors are reducing their positions to lower market risk. Heavy unwinding in some thematic sectors like defence electronics, renewables, and industrials intensified the fall.
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Pressure from Continuous FII Selling
Foreign institutional investors (FIIs) were net sellers for the 7th consecutive day. In the last session, FIIs sold shares worth ₹438.90 crore. Global uncertainty, high valuations, and weakness in Asian markets accelerated the decline.
Weak Rupee and Crude Oil Shook Market Confidence
The rupee weakened by 16 paise to reach 90.11 against the dollar. Strong demand for the dollar due to expensive crude oil and continuous FII selling put pressure on the rupee. Brent crude rose by 0.13% to $63.83 per barrel. Expensive crude is a double whammy for India. It increases the import bill and also raises the risk of inflation, which is why the market remained in a cautious mode.
India VIX Climbed 2%
The India VIX rose by 2.11% to 10.53. A high VIX indicates market fearand a reduced appetite for risk. This is another reason for the market's decline, an effect also seen on Monday.
Disclaimer: The information provided in this article is for general informational purposes only. It is not any kind of investment or financial advice or stock recommendation. Investing in the market comes with risks. Always consult your financial advisor before making any investment.
