Stocks Crash: Worst Week in Years

The week's losses wiped out investor wealth worth Rs 18.43 trillion, with the total market capitalisation of BSE-listed firms now at Rs 441 trillion.

The Indian equity benchmarks recorded their first weekly decline in four weeks -- and the sharpest in nearly two-and-a-half years -- as heavy selloff by foreign portfolio investors (FPIs) continued amid uncertainty over the pace of rate cuts in the US.

The rupee, too, hit a new intraday low of 85.11 per dollar before paring losses to close at 85.02, buoyed by FTSE rebalancing inflows, according to dealers.

Amid subdued investor sentiment, the Sensex ended Friday's session at 78,042, down 1,176 points or 1.5 per cent, while the Nifty 50 closed at 23,588, shedding 364 points or 1.5 per cent.

The 50-share index slipped below its 200-day moving average (DMA) for the first time since November 21, 2024; the Sensex, too, is trading below the 200-DMA.

Friday's decline marked the steepest single-day drop since October 3, 2024.

The week's losses wiped out investor wealth worth Rs 18.43 trillion, with the total market capitalisation of BSE-listed firms now at Rs 441 trillion.

Both indices endured a five-session losing streak, the longest for the Nifty since November 18, 2024, and for the Sensex since October 26, 2023.

Over the week, the Sensex fell nearly 5 per cent, and the Nifty 50 declined 4.7 per cent, marking their sharpest weekly drop since the week-ended June 17, 2022.

This week's losses reversed much of the gains accumulated over the prior four weeks. In that period, the Sensex had advanced 5.9 per cent, and the Nifty 50 had risen 5.3 per cent.

The slide was driven by FPIs, who offloaded shares worth Rs 13,627 crore during the week -- the most since week-ended October 5 this year.

On Friday, FPIs sold shares worth Rs 3,598 crore (Rs 35.98 billion), while domestic institutional investors stepped in with purchases of Rs 1,375 crore (Rs 13.75 billion).

The rupee also faced pressure from FPI outflows, declining 0.26 per cent against the dollar during the week, its sharpest drop since early November.

The dollar index surged to a two-year high of 108.50, adding strain to emerging market currencies.

Market participants said that the rupee remained afloat in the early trade on Friday as State-owned banks sold dollars on behalf of the Reserve Bank of India.

"The RBI was protecting the rupee at 85.10 but there was good enough buying of the dollar, keeping the rupee in the range of 84.95-85.11 for the day," said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

"Due to FTSE rebalancing inflows of $1 billion, the rupee moved up to 84.95 -- but it closed lower at 85.02 eventually," added Bhansali.

The Indian unit had settled 85.07 per dollar on Thursday.

The week was marked by significant developments with Federal Reserve officials lowering their benchmark interest rate for a third consecutive time to a range of 4.25 to 4.5 per cent but bringing down the number of projected rate cuts in 2025 due to inflationary concerns.

Moreover, a record trade deficit of nearly $38 billion for Indian in November dampened sentiment, while concerns grew over FPIs reallocating funds from Indian equities to US markets.

"The markets were expecting a 100 basis-point rate cut in 2025, but the Fed's projection of just 50 basis points disappointed investors. If US President-elect Donald Trump carries out his rhetoric of higher tariffs, it could spike inflation and may upend the outlook for even two cuts," said U R Bhat, co-founder of Alphaniti Fintech.

Broader equity markets were also under pressure, with the Nifty Midcap 100 and Small Cap 100 falling 2.8 per cent and 2.2 per cent, respectively.

Weak market breadth saw 3,044 stocks decline versus 958 that advanced. Reliance Industries dropped 2 per cent, making it the largest drag on the Sensex, followed by HDFC Bank, which slipped 1.2 per cent.

"FPIs continue to sell, largecaps remain under pressure, and global markets are also experiencing significant corrections," said Chokkalingam G, founder of Equinomics, adding retail investors are cautious, especially since many FPIs are on holiday.

"This weakness may persist until the end of December."

The combination of slowing domestic earnings and GDP growth, and expensive valuations is expected to keep the equity markets volatile, with risk-off sentiment likely to dominate at the slightest sign of disappointment.

Feature Presentation: Ashish Narsale/Rediff.com