Sensex, Nifty: Why stock market is down for 4th session today; recovery ahead?

Benchmark stock indices Sensex and Nifty extend their recent losing run to the fourth straight session on Monday, as a strong jobs data in the US cut hopes of Fed rate cuts to one. The strong US data sent the dollar index close to 110 level, with the rupee crashing further to a fresh low of 86.27, raising fears of extended foreign outflows. Crude above $81 a barrel mark also aded to the concerns, as BSE-listed stocks lost Rs 5,13,691 in market capitalisation within 30 minutes into trading.

Sensex plunged 761.57 points, or 0.98 per cent, to 76,617.34. Nifty stood at 23,255.40, down 176.10 points or 0.75 per cent. Three stocks fell for every one that advanced so far. A total of 162 stocks hit their fresh 52-week lows.

“We continue to find the reward-risk balance for the Indian market quite poor despite the recent correction in the market. (1) Most stocks are quite over-valued, (2) earnings upgrades look difficult given generous assumptions and (3) global bond yields may hold up ‘higher-for-longer’. The reaction of hitherto euphoric retail investors, the bedrock of the market, will be interesting to see,” Kotak Institutional Equities said.

Zomato Ltd led the Sensex losers, falling 1.75 per cent to Rs 238.75. Mahindra & Mahindra, Adani Ports, HDFC Bank, Axis Paints, Tech Mahindra, Tata Steel and ITC fell over 1 per cent each. Kotak Mahindra Bank, Nestle India, Bajaj Finserv and Bharti Airtel declined up to 1 per cent.

“Market will continue to be under pressure from the many strong headwinds. The blow out jobs data from the US with 2.56 lakh job creation in December against expectations of 1.65 lakhs means the rate cut expectations in 2025 is now down to one. With the unemployment in the US down to 4.1 per cent, the economy doesn’t need any stimulus. This good economic news is turning out to be bad news for markets which were discounting many rate cuts this year,” V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

For India, the Brent crude rising to $81 is a concern. But the IIP data for November at 5.2 per cent indicates that the economy is recovering from the slowdown in Q2.

“The strength of the US economy augurs well for IT stocks which have been resilient even during weakness in the market. Pharma and health care stocks will be under less pressure since the demand situation is good. With the US 10-year bond yield above 4.7 % FIIs will continue to sell offering opportunities for long-term investors to buy reasonably priced large-caps, particularly in banking. The broader market will continue to be under pressure,” Vijayakumar said.

Avenue Supermarts Ltd (DMart) slipped 2.53 per cent to Rs 3,592, as stock analysts cut earnings and target multiples following the December quarter results. Analysts said DMart’s margins would continue to be under pressure amid the high competition and the management’s focus on the market share, followed by margins.

Adani Wilmar fell 7.75 per cent to Rs 269, in addition to a 10 per cent drop on Friday, as the Day 2 of Adani Wilmar Ltd offer for sale (OFS) kicked off. Adani Wilmar has informed stock exchanges about its intention to exercise the oversubscription option to the extent of 1,96,29,910 shares, representing 1.51 per cent of the total issued and paid-up share capital. This is in addition to 17,54,56,612 shares, representing 13.50 per cent of the total issued and paid-up share capital, forming part of the base offer size.

Stock market recovery ahead?

Emkay Global in its latest strategy note said the domestic stock market could remain weak till March and that a stability is likely from April onwards, with earnings outlook improving and the FPI selling abating by then. Consumption should bounce back from the second half of 2025, it said. The brokerage suggested a 2025 Nifty target of 25,000, and sees small and midcap stocks outperforming ahead.

“We see another year of moderate (6.5 per cent) return in the Nifty, with our conservative target at 25,000: at a moderate valuation of 21.1 times trailing P/E, which is 5 per cent discount to the LTA. SMIDs, however, should deliver stronger returns as they should continue to outperform on fundamentals. We are at the last leg of the earnings downgrade cycle, and we see little more than a 2-3 oer cent risk to FY26 consensus Nifty EPS of Rs 1,251,” Emkay said.

ICICI Securities said volatility may remain elevated, as investors track Q3FY25 earning season. Many heavy weight companies with over 20 per cent weightage in Nifty will announce earnings soon. “Anxiety around new policy measures from Trump government, and Budget expectation that would have bearing on the market sentiment On the global macro front, Dollar index is approaching its key hurdle of 112 amid overbought conditions. However, we believe this up move in Dollar index would cool off once the anxiety around Trump policies settles down which would provide cushion to emerging markets,” it said.

Technical outlook
Akshay Chinchalkar, Head of Research at Axis Securities said the Nifty area between 23,177 and 23,355 will continue to matter on the way down, while immediate resistance stands at 23,600. “Interestingly, even though the percentage of stocks in the Nifty above the 200-day average has fallen to 34, the 14-day momentum isn’t oversold yet, which could mean more weakness could be ahead of us. For the day, let’s watch 23238 on the downside which is critical,” he said