Indian Stock Market Declines Amid Global Selloff, Market Cap Eroded

Indian benchmark indices fell sharply by 5 percent this week, primarily due to a global selloff triggered by the US Federal Reserve’s cautious stance on rate cuts for the coming year. The announcement sparked relentless selling by foreign institutional investors (FIIs), putting significant pressure on the market.

This week, the Sensex lost over 1,000 points in three out of five trading sessions, resulting in a nearly Rs 17 lakh crore erosion in the market cap of BSE-listed companies. Market experts noted that it was a particularly dreadful week for equity markets, with key indices plummeting and wiping out the gains made over the previous four weeks.

Benchmark Indices Suffer Major Losses

The benchmark Sensex index experienced a significant decline, dropping nearly 1,200 points from last week’s closing figure. As a result, it ended the week below the 200 simple moving average (SMA), marking a total loss of nearly 5 percent.

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Osho Krishnan from Angel One stated, “The benchmark index saw a considerable fall, finishing the week below the 200 SMA, signaling a bearish trend in the market.”

Nifty50 Struggles As Key Support Levels Breached

The Nifty50 also suffered a steep decline, breaking through all key support levels. The index is now nearing its most recent swing low, which suggests increased market volatility in the near term.

From a technical perspective, Krishnan explained that the Nifty slipping below the crucial 200 SMA zone indicates that the next potential support levels could be around 23,200-23,100. A decisive breach of these levels could lead to further downside, with the index possibly reaching 22,800 in the coming period.

Sectoral Impact And Market Sentiment

The global selloff initially triggered the market’s decline, but the continued selling pressure revealed the bears’ dominance, especially as the Christmas holiday approaches. On Friday, Sensex settled at 78,041.59, down by 1,176.46 points or 1.49 percent, while Nifty closed at 23,587.50, down by 364.20 points or 1.52 percent.

The Nifty Bank index ended at 50,759.20, dropping by 816.50 points or 1.58 percent. Meanwhile, the Nifty Midcap 100 index finished at 56,906.75, declining by 1,649.50 points or 2.82 percent.

Across sectors, selling pressure was widespread, affecting Nifty’s Auto, IT, Financial Services, Pharma, FMCG, Metal, Media, Energy, Private Bank, Infra, Commodities, and PSE sectors.

Expert Advice For Investors

Given the recent market volatility, experts advise investors to approach the markets with caution and proper risk management. “It’s important to avoid complacent bets in the current environment,” said analysts.

However, amid the challenging conditions, Krishna Appala from Capitalmind Research emphasized maintaining a positive outlook on new-age, platform-based technology companies. He suggested that investors adopt a balanced strategy, combining the stability and fair valuations of large-cap stocks with tactical exposure to domestic-focused tech companies. This approach allows for capturing growth potential while managing geopolitical and policy risks.

As the market faces increasing volatility, experts believe that a prudent, well-diversified investment strategy is essential for navigating the current landscape. Investors are advised to stay vigilant and focus on sectors and companies with strong fundamentals that can weather global economic challenges.