Indian Markets Slump Amid Global and Domestic Headwinds
The Indian stock markets, Sensex and Nifty, saw a fifth consecutive decline on November 13, reflecting both global and domestic concerns that have dampened investor sentiment. The Sensex dropped by 1,015 points (1.3%), settling at 77,690.95, while the Nifty slipped by 324.4 points (1.4%), ending at 23,559.05. Both indices are over 10% lower than their record highs from September, and the broader market showed similar weakness as midcap and smallcap indices fell by more than 2.5%.
Four Key Reasons Behind the Market Slump
1. Weakening Rupee: The rupee reached a record low of 84.40 against the dollar, pressured by foreign outflows and a strengthening dollar index. The depreciation, alongside rising U.S. Treasury yields, has increased volatility, putting further strain on domestic markets.
2. Rising Dollar and U.S. Bond Yields: The dollar index surged to 105.98, its highest since July, following Donald Trump’s recent election victory. The stronger dollar, combined with U.S. bond yields reaching 4.42%, is driving more capital away from emerging markets like India, as investors favor U.S. assets for higher returns.
3. Continuous FPI Selling: Foreign Portfolio Investors (FPIs) continued their selling streak for the 32nd day in a row, with outflows totaling ₹23,911 crore in November alone. The shift of foreign investments to the Chinese market, following China’s stimulus measures, has also redirected investor interest away from India.
4. Inflation and RBI Rate Concerns: Domestic inflation reached a 14-month high of 6.21% in October, surpassing the Reserve Bank of India’s (RBI) tolerance limit of 6%. With inflationary pressures and a depreciating rupee, the chances of a near-term rate cut by the RBI appear slim, adding further uncertainty to the markets.
Sectoral Impact and Expert Opinions
Only a few stocks, like Tata Motors and Infosys, showed resilience, while sectors including real estate, banking, and metals suffered significant losses. Experts advise caution, especially in sectors impacted by high valuations and inflationary pressures, suggesting safer investments in sectors like banking and pharmaceuticals with stronger growth prospects.
