Frontline equity indexes, the Sensex and the Nifty 50, closed the day (8 Jan 2024) with significant losses as a result of weak global cues. But what are the factors which caused Indian equities to fall?
We believe that market indices ceased their upward movements because investors decided to book profits as they eye release of inflation data and key earnings reports which are scheduled for this ongoing week. Stock market experts believe that investors are now focusing on upcoming inflation reports from 2 countries, US and India, slated for potential release on Thursday and Friday, respectively.
While are numerous global factors which caused Indian equities to fall, investors are now worried that if the inflation data didn’t come as expected, the US Fed might delay their decision to cut interest rates.
On Monday, Sensex ended with the loss of ~671 points, or 0.93%, to finally close at ~71,355.22 levels. Nifty 50 closed the day at ~21,513 levels, exhibiting a decline of 198 points, or ~0.91%. Even though mid and small-cap indexes ended lower, their declines were smaller in magnitude against frontline benchmarks.
BSE Midcap index saw a fall of ~0.87%, with small-cap index ending the day ~0.36% lower. Coming to the quantitative data, overall market cap of the companies which are listed on BSE saw the decline to ~INR 366.4 lakh crore from nearly INR 369.3 lakh crore in earlier session. This made the investors lose ~INR 2.9 lakh crore in just one single session.
Now, apart from investors’ focus on booking profits, what are the other reasons?
Leading Asian peers, which includes Shanghai Composite Index, Hang Seng and KOSPI, ended the day lower. Collectively, the impact was felt on Indian indexes too.
Market sentiments remain cautious as investors continue to eye December quarter earnings of leading companies. IT giants, Infosys and TCS, are expected to report 3Q numbers on January 11. Analysts expect that technology firms might post muted revenue and subdued profit due to lower demand. Another reason is that hopes of an early rate cuts by the US Fed are now diminishing, with US labour market still remaining resilient.
Now, all eyes are on the US inflation data that might influence market expectations about the rate cuts. Reuters quoted the CME FedWatch Tool in saying that overall market is pricing ~64% probability of rate cut in March 2024.
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