Final Trade: Sensex down 900 points; Nifty slips below 24,200 as Fed rate, FII outflows weigh

Indian equity markets saw sharp declines on Thursday as caution over U.S. policy changes and the Federal Reserve’s upcoming rate decision outweighed an overnight rally on Wall Street. With the Sensex down over 900 points and the Nifty falling below 24,200, sectors across the board—from IT to metals—witnessed substantial losses, highlighting investor caution amid a complex global environment.

Key factors driving the market’s decline

1) Federal Reserve rate decision anticipation 
Despite a strong handover from the U.S. markets following Donald Trump’s presidential win, Indian investors are proceeding with caution, awaiting clarity from the U.S. Federal Reserve. The Fed’s anticipated 25-basis-point rate cut has garnered attention, with market participants closely analyzing Fed Chair Jerome Powell’s comments for cues on future rate direction.

2) Rupee’s record low  
The Indian rupee hit an all-time low amid expectations that Trump’s policies might further strengthen the U.S. dollar. A robust dollar often prompts capital outflows from emerging markets, adding pressure on the rupee and complicating the inflation outlook.

3) Persistent foreign fund outflows 
Foreign Institutional Investors (FIIs) have been offloading Indian equities aggressively. With Rs 4,445.59 crore sold off on Wednesday alone and nearly Rs 94,000 crore in October, continued foreign outflows are deepening bearish sentiment in domestic markets.

4) China’s stimulus hopes to lift Asian peers  
While Indian equities struggled, Chinese markets saw a boost from speculation that China might roll out a large stimulus package. Investors are watching the NPC Standing Committee’s ongoing meeting, which may approve up to 10 trillion yuan in additional spending.

5) Weak earnings season weighs on sentiment  
lingering effects of lacklustre Q2 results have continued to drag down investor morale. A number of major companies have reported slower earnings growth, contributing to uncertainty over the near-term market trajectory.

6) Policy concerns amid Trump’s victory
Although Trump's anti-China stance could open up new trade opportunities for India, potential tariffs on Indian exports to the U.S. remain a concern. This policy uncertainty is adding another layer of complexity to the market, impacting investor sentiment.

7) IT sector faces volatility
IT stocks, which had rallied after Trump’s victory, saw renewed pressure due to concerns over possible protectionist policies. Indian IT firms, which rely heavily on U.S. clients, may face headwinds if Trump imposes stricter policies on outsourcing. Companies like Mphasis, LTIMindtree, and Tech Mahindra saw mid-day declines, with stocks down by as much as 2.5 per cent.

Despite Wall Street’s rally, the market trajectory for Indian equities remains uncertain in the near term. Analysts advise investors to brace for volatility, focusing on value-oriented stocks amid a high valuation environment. As global factors like U.S. policy and the Fed's rate path unfold, Indian markets are likely to remain cautious.