The Indian stock market saw a sharp decline as the Sensex dropped by 1,017.23 points, closing at 81,183.93, while the Nifty tumbled 292.95 points, settling at 24,852.15. This significant slump reflects broader market concerns and investor caution.
Global market weakness dampens sentiment
Ajit Mishra, Senior Vice President of Research at Religare Broking, pointed to the recent weakness in U.S. markets as a key factor that stalled momentum in Indian markets. "Participants have become cautious ahead of the upcoming U.S. jobs data," Mishra said, reflecting broader global concerns. In addition, foreign portfolio investors selling off shares further hurt domestic market sentiment.
FPI regulations add pressure
Vijay Chopra, a market expert, noted that the correction of 2-3% should not be viewed as a significant fall, especially with markets trading at all-time highs. However, reports that non-registered FPIs may face restrictions in operating in the market added pressure to the sell-off. SEBI’s deadline for FPIs to disclose beneficial ownership loomed over the trading session, as failure to comply could disqualify these investors from the Indian market, forcing them to wind up their investments.
Profit booking and global data influence
Joseph Thomas, Head of Research at Emkay Wealth Management, added that the initial highs seen earlier in the week have led to profit booking, especially in overheated segments of the market. He emphasised that earnings would now play a critical role in dictating future price movements.
On the global front, attention is focused on U.S. economic data and Federal Reserve policies. U.S. Federal Reserve Chair Jerome Powell hinted at a potential rate cut, but stopped short of providing specific guidance. Analysts believe a rate cut could trigger a market rebound.
Political risks add to uncertainty
Amid this market turbulence, political risks are also rising, with state elections approaching in India. Ajay Bagga, a banking and market expert, warned that domestic political developments could further impact market sentiment in the coming weeks.
Looking ahead
The Indian markets are now poised to react to global economic data, including U.S. payroll figures and potential Fed rate cuts while navigating domestic regulatory changes and political risks.
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