Indian stock markets fell sharply for the second consecutive session on Tuesday, with the S&P BSE Sensex dropping over 700 points and the NSE Nifty 50 losing 200 points. Investor caution increased amid global uncertainty, a weakening Indian rupee, and significant foreign fund outflows.
The Sensex slipped below 84,400, while the Nifty traded under 25,750, marking its steepest fall in over two months. Fragile market sentiment and nervous investors added pressure to equities.
Fed Jitters and Global Market Pressure
Markets are focused on the U.S. Federal Reserve’s December 10 policy decision, a key event for global investors. While a 25-basis-point rate cut is widely expected, traders remain wary of a surprise hold. Any unexpected move could strengthen the U.S. dollar and intensify pressure on emerging markets, including India.
Other central bank updates this week, including the Reserve Bank of Australia, Swiss National Bank, and Bank of Canada, are expected to maintain current rates. Meanwhile, bond markets are adjusting to a slower-than-expected U.S. easing cycle, with Wall Street banks revising their 2026 rate cut forecasts amid sticky inflation and strong economic data.
Asian markets also reflected global nervousness. Japan’s Nikkei declined 0.08%, South Korea’s Kospi fell 0.58%, and the MSCI Asia-Pacific ex-Japan index slipped 0.28%, fueling investor caution in India.
Foreign Institutional Investors (FII) Outflows
Foreign fund movements continue to weigh on the market. On December 8, FIIs sold Rs 656 crore worth of Indian equities, bringing monthly net outflows to Rs 6,618 crore. Domestic Institutional Investors (DIIs) partially offset this with net buying of Rs 2,542 crore.
“Persistent rupee depreciation has forced FIIs to continue selling,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments. “Rising Japanese bond yields could trigger further yen carry trade reversals, adding volatility to Indian markets.”
Nifty Derivatives Expiry Adds Pressure
The Nifty’s weekly derivatives expiry added another layer of volatility. Expiry-related trading, driven by rollover activity, often triggers sharp intraday market swings, contributing to the recent declines.
Rupee Weakness and Market Impact
The Indian rupee weakened to 90.15 against the U.S. dollar in early trade. Strong dollar demand from corporates and ongoing FII withdrawals are keeping the currency under pressure. A weaker rupee may increase import costs, adding inflationary pressure just as the economy faces global market uncertainty.
In Summary:
The Sensex decline is driven by a combination of global financial jitters, rupee weakness, foreign fund outflows, and derivatives-related volatility. Investors are cautious ahead of key central bank decisions and remain watchful for the Fed’s upcoming policy announcement.
