Indian stock markets suffered a sharp setback on Monday, as both Sensex and Nifty took significant hits. The decline was sparked by a stronger-than-expected US jobs report, which reduced hopes for early interest rate cuts by the Federal Reserve. This, combined with slowing corporate earnings, dampened investor sentiment further.
The BSE Sensex dropped over 1,100 points to a low of 76,250, while Nifty50 slid by 350 points to 23,047. The market capitalization of all BSE-listed companies plummeted by Rs 14.54 lakh crore, now standing at Rs 416.08 lakh crore, reflecting the mounting pressure from both domestic and global factors.
Weakening Rupee Hits Record Low
A key factor in the market’s fall is the sharp depreciation of the Indian Rupee, which hit a two-year low of Rs 86.27 against the US dollar. The robust US dollar, driven by rising bond yields and strong jobs data, has weighed heavily on the rupee. This depreciation has sparked concerns about capital outflows and rising import costs, exacerbating inflationary pressures. The weakening currency has also created uncertainty ahead of the upcoming budget, with investors hoping for measures to stabilize the economy.
Budget Expectations Heighten Investor Anxiety
The Indian government’s upcoming budget is in sharp focus, with investors hoping for fiscal relief to address the economic challenges. However, uncertainty over how the government will handle the fiscal situation, especially with a weak rupee and inflation, is intensifying anxiety. If the budget fails to ease these pressures, market sentiment could further sour, delaying any potential recovery.
Global Economic Pressures and US Data
On the global front, stronger-than-expected US economic data has caused a ripple effect in Asian markets, including India. Expectations that the Federal Reserve may hold off on rate cuts have led to tighter global liquidity, further dampening market confidence. Additionally, rising US bond yields, now at 4.73%, are strengthening the US dollar, which continues to put pressure on the rupee and intensify concerns over foreign institutional investors pulling out from India.
Slowing Earnings Growth Adds to Market Woes
To make matters worse, Indian corporate earnings are showing signs of slowdown. After years of robust double-digit growth, earnings projections for the last two quarters have been downgraded, with Q3 results expected to be weak. Full-year growth forecasts for FY25 are now in single digits, further eroding investor confidence.
