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Stock market crash today: Indian equity benchmark indices, BSE Sensex and Nifty50, crashed in trade on Thursday after the US Federal Reserve‘s projection of fewer interest rate reductions in 2025, affecting investor sentiment and raising concerns about potential outflows from foreign investors.
The Nifty 50 fell 1.02% to 23,951.7 points, whilst the BSE Sensex decreased 1.2% to 79,218.05, with both indices closing below their 50-day averages for the third consecutive session.
The Fed announced an anticipated 25 basis points rate reduction but indicated only two cuts in 2025, which is half of what officials had predicted in September.
American rate reductions typically benefit emerging markets like India by encouraging foreign investments.
The Fed’s conservative outlook has affected foreign investors’ confidence in local shares, according to two analysts.
“Lower pace of rate cuts result in foreign investors going into a ‘risk-aversion’ mode and reduce inflows in emerging markets like India. Hence, markets have seen selling pressure today,” Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services told Reuters.
Indian indices have declined over 3% this week, heading towards their first weekly decrease in five weeks. Foreign investors have sold shares worth a net 80.06 billion rupees ($941.2 million) until Wednesday.
Financial and IT sectors led the decline, dropping 1.2% and 1.3% respectively.
Indian IT companies are particularly affected by US interest rates due to their significant revenue generation from that region.
The metals sector declined 1% alongside global counterparts, influenced by a stronger dollar, which increases costs for non-dollar currency holders purchasing dollar-denominated commodities. The smaller market segments, smallcaps and midcaps, decreased by 0.5% and 0.3% respectively.
ICICI Bank experienced the largest decline among the top five Nifty 50 companies, falling 2%. In contrast, Dr Reddy’s Laboratories gained 4% following Nomura’s upgrade to “buy” from “neutral”. Inventurus Knowledge Solutions showed strong performance on its first trading day, rising 48%.
Why BSE Sensex, Nifty50 crashed today
1. The Fed’s announcement of a 25-basis-point rate reduction, with projections showing only two quarter-point cuts in 2025, lower than market expectations. The probability of a January 2025 rate cut decreased to 6% from 16%.
Dr. V K Vijayakumar stated: “When valuations are high the market needs only a trigger to correct sharply. This trigger was provided by the Fed guidance of fewer rate cuts in 2025, which went against market expectations.”
2. US 10-year bond yields reached 4.524%, while the dollar index rose to its highest since November 2022, reaching 108.15. These factors typically affect emerging market investments negatively.
3. Global markets reflected similar trends, with US indices showing significant losses. Asian markets followed, with Japan’s Nikkei 225, China’s Shanghai Composite, and Korea’s Kospi all declining.
4. Technical analysis showed Nifty forming a 3 black crows pattern, with Akshay Chinchalkar noting: “The next critical level is the November 28 trough of 23,873. A drop below this would invalidate the bullish head-and-shoulders pattern with a target of 25,500, making the 23,300 lows more vulnerable.”
