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Indian benchmark equity indices, the BSE Sensex and Nifty50, opened sharply lower on Monday due to growing global concerns.
Stock Market Crash
Benchmark equity indices, BSE Sensex and NSE Nifty50, closed lower on the first trading session of the week, each declining by more than 1 per cent. The 30-share Sensex plummeted 1,031.65 points, or 1.35 per cent, to settle at 76,347.26, trading within a range of 77,128.35 to 76,249.72 throughout the day.
Similarly, the Nifty50 finished 345.55 points, or 1.47 per cent, lower at 23,085.95. The Nifty50 saw a high of 23,340.95 and a low of 23,047.25 during the session.
The market was dominated by the bears, with 46 out of the 50 Nifty50 stocks closing in the red. The biggest losers included Adani Enterprises, Trent, BPCL, Power Grid Corporation, and Bharat Electronics, with losses reaching as much as 6.21 per cent. On the other hand, Axis Bank, TCS, Hindustan Unilever, and IndusInd Bank were among the four stocks that ended in the green, with gains of up to 0.78 per cent.
Broader market indices also mirrored the downtrend, with both the Nifty Smallcap100 and Nifty Midcap100 indices falling by over 4 percent each.
All sectoral indices on the NSE ended in negative territory. The Nifty Realty index was hit hardest, dropping 6.47 per cent, followed by the Nifty Media index, which fell 4.54 per cent. Other sectors like Nifty PSU Bank, Metal, Consumer Durables, and Healthcare also saw declines of more than 3 per cent each.
‘FIIs will continue to sell, offering opportunities for long-term investors’
“Market will continue to be under pressure from the many strong headwinds. The blow out jobs data from the US with 2.56 lakh job creation in December against expectations of 1.65 lakhs means the rate cut expectations in 2025 is now down to one. With the unemployment in the US down to 4.1 per cent the economy doesn’t need any stimulus. This good economic news is turning out to be bad news for markets which were discounting many rate cuts this year.
For India, the Brent crude rising to $81 is a concern. But the IIP data for November at 5.2 per cent indicates that the economy is recovering from the slowdown in Q2.
The strength of the US economy augurs well for IT stocks which have been resilient even during weakness in the market. Pharma and health care stocks will be under less pressure since the demand situation is good. With the US 10-year bond yield above 4.7 per cent, FIIs will continue to sell offering opportunities for long-term investors to buy reasonably priced large-caps, particularly in banking. The broader market will continue to be under pressure.”
Views by: Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services
Global Cues
Asian markets declined on Monday, while the dollar remained near 14-month highs, following a stronger-than-expected US jobs report. The robust payrolls data contributed to rising bond yields and raised concerns over high equity valuations just as earnings season begins.
The US Labor Department’s data revealed that the economy added 256,000 jobs in December, surpassing analysts’ expectations of 160,000, according to a Reuters poll.
This strong jobs report has heightened the focus on Wednesday’s consumer price index data. Any core inflation rise exceeding the forecasted 0.2% could significantly diminish expectations for rate cuts.
Adding to market pressure, oil prices surged to four-month highs due to signs of reduced crude shipments from Russia, following heightened US sanctions.
Markets have already tempered their expectations for Federal Reserve rate cuts in 2025, now anticipating only a 27 basis point reduction for the year. The terminal rate is seen around 4.0%, down from earlier expectations of 3.0%.
Barclays’ Christian Keller stated, “Given such strong data, we now expect the Fed to cut rates only once this year, by 25bps in June.” He noted that the economy is likely to slow in the coming quarters, with inflation continuing to decline before tariffs contribute to inflationary pressure in the second half.
At least five Federal Reserve officials are scheduled to speak this week, with New York Fed President John Williams addressing the market on Wednesday.
The hawkish stance on rates has pushed 10-year Treasury yields to 14-month highs of 4.79%, trading at 4.764% in Asia.
Higher yields on risk-free bonds increase the discount rate for corporate earnings, making bonds more attractive relative to equities, cash, property, and commodities. This could impact investor sentiment as earnings season begins, with major banks like Citigroup, Goldman Sachs, and JPMorgan reporting on Wednesday.
In Asia, a holiday in Japan led to lighter trading volumes, with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.4%. Hong Kong’s Hang Seng Index dropped 1.6%, trading below 19,000 for the first time since last September. The CSI 300 index in mainland China fell by 0.38%, and the Shanghai Composite declined 0.37%. South Korea’s Kospi lost 0.85%, while Australia’s S&P/ASX 200 dropped 1.24%.
In China, trade data for December is expected later on Monday, followed by GDP, retail sales, and industrial output figures on Friday.
US stock futures also showed declines, with S&P 500 futures and Nasdaq futures both down by 0.1%, following Friday’s pullback. Wall Street finished lower on Friday, with 10 out of 11 S&P 500 sectors closing in the red, led by declines in financials, real estate, technology, and consumer staples. Energy stocks were the only sector to finish higher. The three major indices marked their second consecutive week of losses.
The Dow Jones Industrial Average fell 1.63% to 41,938.45, the S&P 500 dropped 1.54% to 5,827.04, and the Nasdaq Composite lost 1.63% to 19,161.63.
The rising Treasury yields have supported the dollar, causing the euro to fall for eight consecutive weeks and hover just above $1.0240, its lowest level since November 2022.
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