The Indian stock market witnessed a sharp selloff on Thursday, December 19, with the Sensex plunging nearly 1,000 points and the Nifty 50 nosediving below the 23,900 level. This marks the fourth consecutive session of decline, wiping out ₹9 lakh crore in investor wealth over the past four days. The BSE market capitalisation dropped from ₹459 lakh crore to ₹450 lakh crore during this period.

The Sensex opened at 79,029.03, fell to an intraday low of 79,020.08, and finally closed 964 points lower at 79,218.05. Similarly, the Nifty 50 opened at 23,877.15, dropped to 23,870.30, and ended the day 247 points down at 23,951.70.

Despite heavy losses, mid-cap and small-cap segments outperformed large caps, with the BSE Midcap index declining only 0.30% and the BSE Smallcap index dropping 0.28%.

Key Sectoral Performance

Most sectoral indices registered losses, led by:

• Nifty Bank
• Financial Services
• IT
• Consumer Durables

However, the Nifty Pharma index bucked the trend, rising almost 2%, indicating a defensive play by investors in uncertain times.

Five Key Factors Driving the Market Crash

1. The US Fed Factor
   The US Federal Reserve's recent announcement of a 25 bps rate cut to 4.25-4.50% dampened market sentiment globally. While the cut met expectations, the Fed's revised outlook of only two more rate cuts by 2025, against expectations of three or four, spooked investors.

   • US markets reacted sharply, with the S&P 500 and Nasdaq falling 3%.
   • The US dollar strengthened, pressuring emerging markets like India.

2. Foreign Capital Outflows
   Foreign Institutional Investors (FIIs) have been net sellers of Indian equities, offloading over ₹8,000 crore in the last three sessions.

   • A stronger dollar and rising US bond yields have made emerging market assets less attractive.
   • Domestic Institutional Investors (DIIs) have provided some support, but not enough to offset the selling pressure.

3. Rupee Hits Record Low
   The Indian rupee hit a historic low of 85.3 per dollar, further eroding market confidence.

   • A weak rupee discourages foreign investments as it reduces returns upon currency conversion.
   • It also contributes to higher inflation by making imports costlier, which could lead to tighter monetary policies.

4. Macroeconomic Headwinds
   Concerns over India’s macro fundamentals have resurfaced, with data pointing to:

   • Record trade deficit of $37.84 billion in November 2024, far exceeding expectations.
   • Slowing GDP growth, with Q2 growth hitting a two-year low and marking the third consecutive quarter of deceleration.

5. Uncertainty Over Earnings Recovery
   After weak Q1 and Q2 earnings, the December quarter is being closely watched.

   • Experts believe a significant recovery might only materialise by Q4, supported by government spending and a strong crop season.
   • Without a visible earnings recovery, stock price performance could remain muted in CY25, adding to market pessimism.

Stocks in News

Stove Kraft and IKEA Partnership
Stove Kraft's shares surged to a 52-week high of Rs 975 following its announcement of a strategic partnership with IKEA. The collaboration aims to develop a new range of cookware to be launched through IKEA’s global store network in 2026. This deal is expected to expand Stove Kraft's international presence, marking a significant milestone in its global growth strategy.

Zydus Lifesciences’ US FDA Approval
Zydus Lifesciences has received US FDA approval to manufacture and market Lidocaine and Prilocaine Cream USP, a topical anesthetic used for minor surgeries and local analgesia. With a market size of $22.1 million in the US as of October 2024, this approval strengthens Zydus’ portfolio in the US market, boosting its export opportunities.

Borosil Renewables Cancels Rights Issue
Borosil Renewables' stock is under pressure after its board canceled a Rs 450 crore rights issue. Instead, the company plans to raise Rs 100 crore through a preferential issue of shares to its promoters at Rs 530 per share. Additionally, the company approved a Rs 675 crore investment to set up two furnaces with a capacity of 250 tonnes per day each.

Dolphin Offshore CEO Resignation
The CEO of Dolphin Offshore Enterprises (India), Krishan Gopal, has tendered his resignation, effective December 17, citing personal and professional reasons. This leadership change raises questions about the company's strategic direction moving forward.

Infosys Expands in Kolkata
Infosys inaugurated a new development centre in Kolkata, constructed with an investment of Rs 426 crore. The facility, which supports over 4,000 employees, operates on a hybrid working model, aligning with Infosys’ strategy to expand its regional presence.

FDC Receives ANDA Approval
FDC has obtained US FDA approval for its ANDA for Cefixime 400 mg tablets, used to treat bacterial infections. The product addresses a $1.2 billion market in the US, further enhancing FDC’s standing in the pharmaceuticals sector.

Interarch Partners with Jindal Steel
Interarch Building Products’ shares are rising after announcing a strategic partnership with Jindal Steel & Power. The collaboration will focus on using steel for constructing multi-story buildings, data centres, and heavy structures, reflecting a robust growth trajectory in infrastructure projects.

Vishal Mega Mart Bulk Deal
Nomura India Investment purchased 3 crore shares of Vishal Mega Mart for Rs 325 crore through a bulk deal, executed at an average price of Rs 108.3 per share. This transaction highlights strong institutional interest in Vishal Mega Mart, which is gearing up for its IPO listing.

Adani Power Tax Dispute with Bangladesh
Bangladesh’s interim government has accused Adani Power of violating a multi-billion-dollar agreement by withholding tax benefits. The deal, signed in 2017, aimed to supply power from Adani’s coal-fired plant in eastern India. Adani has denied any wrongdoing, maintaining its compliance with all contractual obligations.

Investor Impact

In just one trading session, investors lost approximately ₹3 lakh crore, with the total four-day loss amounting to ₹9 lakh crore.

• Large caps bore the brunt of the selloff, while mid-cap and small-cap stocks showed resilience.
• Defensive sectors like pharma offered some relief.

What Lies Ahead?

Market experts believe that clarity on earnings recovery, coupled with stable macroeconomic indicators, is crucial for regaining investor confidence. Global cues, especially regarding the US Fed’s monetary policy, will also play a key role.

Key Takeaway: Investors are advised to exercise caution, focus on fundamentally strong stocks, and monitor global developments closely to navigate this volatile phase in the Indian stock market.