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This week there was a huge decline in the Indian stock market, due to which investors had to suffer huge losses. As the market closed on Friday, the Sensex fell by more than 4000 points in the entire week, while the Nifty saw a decline of about 5%. Let us know the main reasons for this decline in the market.
1. Concerns about US Fed Reserve Rate Cut
The US Central Bank Federal Reserve has changed its predictions regarding interest rate cuts.
- It is now likely that rates will be cut only twice by the end of 2025.
- Whereas the market was expecting 3 to 4 cuts earlier.
This increased disappointment among investors and had a negative impact on the market.
2. Withdrawal of FIIs (Foreign Institutional Investors)
Foreign investors made huge withdrawals from the Indian market due to the strengthening of the dollar and rise in bond yields.
- In the last 4 trading days, FIIs sold shares worth Rs 12,000 crore from the Indian stock market.
- This withdrawal of foreign funds weakened the market.
3. Macroeconomic concerns
Macroeconomic aspects related to the Indian economy also worried investors.
- The value of rupee against the dollar has reached its all-time low.
- India’s trade deficit was at its highest level in November 2024.
- The performance of the economy remained weak in the second quarter of the current financial year, which affected investor sentiment.
4. Weak position of corporates
The first and second quarters of this year were weak for Indian companies.
- Now recovery is expected from the third quarter, but rising inflation and interest rates kept the market under pressure.
- Investor confidence weakened due to poor performance of corporates.
5. Slow performance of major sectors
One of the main reasons for the decline in the market is the poor performance of leading sectors.
- Banking, IT, and financial sectors did not perform as expected.
- The weakness of these sectors put additional pressure on the market and the market is facing a continuous decline.