Indian Markets Plunge as Sensex Hits Eight-Month Low
MUMBAI: The Indian stock market faced a significant downturn on Monday, with the Sensex dropping 857 points, or 1.1%, to close at 74,454, marking its lowest level in over eight months. This decline, attributed to weak global sentiment and substantial foreign fund outflows, reflects growing concerns over U.S. tariff policies and escalating trade tensions. The broader Nifty index also fell by 243 points, or 1.1%, ending the day at 22,553.
Global Influences Weigh on Indian Markets
The selloff in Indian equities was largely influenced by negative trends in global markets. American stocks experienced sharp declines on Friday, with the S&P 500 and Dow Jones Industrial Average both losing 1.7%, while the Nasdaq Composite fell by 2.2%. These losses were driven by a report indicating that U.S. business activity had reached a 17-month low, coupled with rising inflation expectations, which increased from 3.3% to 4.3%, according to a University of Michigan survey. The weak consumer confidence in the U.S. has also adversely affected Indian IT stocks, further contributing to the market’s decline.
Prashanth Tapse of Mehta Equities noted that the market is increasingly concerned about potential U.S. tariff hikes on exporting nations, which could significantly impact developing economies like India. Additionally, the ongoing exit of foreign institutional investors (FIIs) from the Indian market, with no signs of reversal, has added to the bearish sentiment. On Monday alone, FIIs withdrew Rs 6,287 crore from equities, bringing the total outflow for the month to Rs 23,710 crore.
Sectoral Impact and Wealth Erosion
The downturn was widespread across various sectors, with banking, IT, telecom, and metal stocks leading the losses. Over the past five trading sessions, the Sensex has lost a total of 1,542 points, or 2%, while the Nifty has declined by 406 points, or 1.8%. This selloff has resulted in a staggering loss of over Rs 4 lakh crore in market wealth in just one day.
The BSE smallcap index fell by 1.3%, and the midcap index decreased by 0.8%. The IT sector was particularly hard hit, dropping 2.6%, followed closely by telecom at 2.3%, metals at 2.2%, and commodities at 1.5%. In contrast, the auto and fast-moving consumer goods (FMCG) sectors managed to post gains amid the broader market decline.
Outlook Amidst Market Turbulence
Despite the recent market turmoil, Citi has upgraded its outlook on Indian equities from ‘neutral’ to ‘overweight,’ projecting that the Nifty could rise to 26,000 by December, representing a potential 15% increase. The brokerage cited several positive factors, including anticipated tax cuts, a recovery in public investment, and possible interest rate reductions as key drivers for this optimistic forecast. The Reserve Bank of India (RBI) recently lowered rates by 25 basis points, and further easing is expected in the coming months.
In the broader Asian markets, most indices ended lower, with declines noted in Seoul, Shanghai, and Hong Kong, while Tokyo remained closed for a holiday. Conversely, European markets showed resilience, with Germany’s DAX gaining 0.7%. In commodities, Brent crude oil prices slipped slightly to $74.01, while the U.S. dollar strengthened against several currencies.
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