Stock market today: Why Sensex, Nifty are falling; what's ahead?

Benchmark indices Sensex and Nifty tumbled on Tuesday for the second straight session. A total of 27 of 30 Sensex stocks declined, even as the broader market sentiment, as suggested by advances and declines, was not-so-alarming. Global markets were awaiting the outcome of two-day US Fed meeting starting today, which could offer a summary of economic projections for the world’s largest economy.

At home, there were concerns over weak rupee and foreign outflows. Data showed India’s trade deficit ballooned to a record high of $37.8 billion in November from $27.1 billion in October, worse than consensus expectations of $23 billion.

“On the policy front, the widening trade deficit calls into question the RBI’s FX intervention strategy, which has been aimed at capping rupee depreciation pressures. With the trade deficit widening, allowing currency to weaken somewhat can be an automatic stabiliser, which can cool imports, even if it does not boost exports,” Nomura India said earlier today.

All major Asian markets fell up to 1 per cent today. A weak Chinese data and fears the Fed may go in for fewer rate cuts as anticipated earlier due to likely high inflation in the US due to trade war hurt sentiment further.

The BSE Sensex fell 756.44 points, or 0.93 per cent to 80,992.13. Nifty stood at 24,427.40, down 240.85 points or 0.98 per cent.

Bajaj Finserv Ltd fell 2.09 per cent to Rs 1,637.60 and was the worst Sensex performer. It was followed by Bharti Airtel Ltd, Power Grid, Reliance Industries and Nestle India, which fell 1.4-1.8 per cent. HDFC Bank, ICICI Bank and RIL contributed over 300 points to the Sensex fall.

“The ratio chart of Nifty 500/Nifty 100 recorded breakout from six months consolidation, suggesting broader market to outperform going ahead. Elongation of rallies followed by slower pace of retracement amid improving market breadth indicates robust price structure. Buying on dips would be the prudent strategy to adopt,” ICICI Securities said in a note.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services: “Globally markets will be looking forward to the FOMC outcome on Wednesday. The markets have already discounted a 25bp rate cut and, therefore, the focus will be on the Fed chief’s commentary. Any departure from a dovish commentary will be a negative from the market perspective. This is only a remote possibility. The US services PMI coming strong at 58.5 per cent indicates a resilient economy, which augurs well for the market,” he said.

Vijayakumar said the sharp spike in India’s trade deficit to $37.8 billion in November will put pressure on the rupee pushing it towards 85 to the dollar. Exporters like IT and pharma will benefit from depreciating rupee and for importers the import cost will increase, he said.