Expectations of a festive rally on Dalal Street have been dashed, as the US Federal Reserve’s hawkish commentary on future rate cuts has spooked markets. India’s equity benchmark indices – the BSE Sensex and NSE Nifty – recorded their steepest weekly declines in over two years, plummeting nearly 5 per cent each.
This week’s crash erased almost all the recovery seen between November 21 and December 13, following two months of relentless selling. The Nifty fell by 4.5 per cent (1,150 points) over the week, while the Sensex dropped 4.8 per cent (3,933 points).
On Friday, the Sensex closed 1,176.46 points (1.49 per cent) lower at 78,041.59, and the Nifty fell 364.2 points (1.52 per cent) to 23,587.50.
Investors bore massive losses, with the market capitalisation of BSE-listed firms shrinking by Rs 18 lakh crore this week, falling from Rs 460 lakh crore to Rs 442 lakh crore. On Friday alone, Rs 9 lakh crore was wiped out.
The sell-off was triggered by the Fed’s cautious stance on rate cuts, now projecting just two rate cuts in 2025 instead of the earlier estimate of four. This shift in policy has impacted global equity and bond markets, with rising US bond yields weighing heavily on global currencies, including the Indian rupee.
Additionally, the spike in yields has led to increased selling by foreign institutional investors (FIIs), adding further pressure on domestic equities.