Why BSE Sensex and Nifty50 crashed today:
- US consumer expenditure exceeded forecasts in October, triggering inflation worries. The spending increased by 0.4%, above the anticipated 0.3%, following September’s adjusted 0.6% rise. Despite demonstrating economic strength, inflation remains higher than the Federal Reserve’s 2% goal.
Sustained inflation coupled with possible increased import duties could restrict the Federal Reserve’s capacity to reduce interest rates in 2024. - The Federal Reserve anticipates a third rate reduction in December, yet records from the November 6-7 Federal Open Market Committee meeting showed disagreements regarding future rate adjustments, causing investor unease.
LSEG data indicates traders anticipate a 65% likelihood of a December rate cut, projecting total reductions of 75 basis points through 2025’s end. - The Nifty IT index declined by over 2.3% following US inflation reports suggesting slower rate reductions. Every Nifty IT component decreased, with LTTS and Infosys showing the largest drops at nearly 3.5%. HCL Tech, LTIMindtree, Mphasis, Tech Mahindra, and TCS experienced 2-3% decreases. US rate reduction delays affect consumer spending, subsequently impacting Indian IT sectors.
- Indian markets reflected Asian share declines amidst concerns over the Fed’s careful approach to
rate cuts following robust US inflation data.
Market sentiment weakened due to potential tariff conflicts from US President-elect Trump’s policies and Ukrainian city explosions.
MSCI’s Asia-Pacific share index excluding Japan decreased 0.4%. US markets declined previously, with S&P 500 dropping 0.38%, Nasdaq Composite falling 0.59%, and Dow Jones reducing 0.31%. - Elevated US Treasury yields (10-year at 4.25%, 2-year at 4.23%) and strengthened US dollar (index at 106.39) pressure Indian equities. Higher yields enhance US asset attractiveness, prompting emerging market outflows.
A stronger dollar increases foreign capital costs, reducing investment appeal. - FIIs returned to Indian equities, purchasing Rs 11,100 crore worth stocks over three sessions, reversing 38 sessions of outflows.
The third day showed reduced buying at Rs 7.78 crore, suggesting declining momentum.
FPIs remain November’s net sellers, reducing holdings by Rs 15,845 crore, following October’s Rs 94,017 crore outflow. Year-to-date outflows total Rs 9,252 crore. - Market pressure increased due to monthly expiry.
"We have seen a lot of swings and market volatility. Of course, the monthly expiry cannot be ruled out.
The factors still indicate that there will be mixed cues for the rest of the day, and we are looking at 24,000 as a crucial make-or-break zone," Shivangi Sarda of Motilal Oswal Financial Services told ET Now.