Indian Market Snaps Three-Week Gain; Rupee Hits Record Low, IT Sector Drags
The Indian stock market witnessed a sharp reversal this week, snapping its three-week winning streak with the worst weekly fall in nearly six months. Key indices such as the Nifty50 and BSE Sensex declined by around 2.65% and 2.66% respectively. This downturn was driven by multiple challenges including persistent selling by Foreign Institutional Investors (FIIs), fresh US tariffs on Indian pharmaceutical exports, higher US visa fees affecting the tech sector, and a weakening rupee that hit a fresh record low of 88.80 against the US dollar.
Market Performance Overview
For the week, Nifty50 dropped 672.35 points to close at 24,654.70, and BSE Sensex fell by 2199.77 points to finish at 80,426.46. The BSE Small-cap and Mid-cap indices saw significant losses, declining 4.2% and 4.5% respectively. Large-cap stocks like Tata Consultancy Services (TCS), Reliance Industries, Infosys, and HDFC Bank bore the brunt of the fall, with notable declines in IT, pharma, and realty sectors. Nifty IT index plunged 8%, the sharpest among sectors, underscoring the pressure from US policy developments and visa issues for tech firms.
Despite heavy foreign outflows amounting to Rs 19,570.03 crore for the 13th consecutive week, Domestic Institutional Investors (DIIs) continued their buying spree, investing Rs 17,411.40 crore in equities, providing some support amidst turbulence.
Impact of the Falling Rupee
The Indian rupee’s decline to 88.80 against the dollar adds to inflationary concerns and raises costs for imports, further worrying markets. A weaker rupee also impacts foreign investor sentiment negatively, potentially leading to continued FII outflows. This currency devaluation comes at a time when global economic uncertainties remain heightened.
Implications for Global Markets
India’s market downturn could have ripple effects on global markets in several ways:
Foreign Investment Shifts: Continued FII selling from India may signal caution among global investors, prompting them to reassess risk exposure in emerging markets. This could result in capital flight to safer assets or more stable markets.
Tech and Pharma Sector Pressure: US tariffs and visa restrictions on Indian companies may disrupt global supply chains, impacting multinational corporations relying on Indian IT and pharmaceutical exports.
Currency Volatility: The rupee’s weakness could add to broader volatility in emerging market currencies, with investors watching closely for currency risk, especially amid tightening US monetary policy.
Trade and Tariff Dynamics: US tariffs on Indian pharma set off concerns about future trade negotiations and protectionist trends that could affect global commerce and investment flows.
Conclusion
The Indian equity markets face headwinds from external and domestic factors including foreign investor outflows, US policy shifts, and currency depreciation. While domestic institutional buying and GST implementation offer some cushion, the situation highlights vulnerabilities in emerging markets amid global economic uncertainties. Investors worldwide will be closely monitoring India’s market trajectory as it plays a pivotal role in global emerging market dynamics.