Sensex crashes over 1,000 points: Key reasons behind market turmoil

Stock markets faced a steep decline on Friday as the Sensex tanked over 1,000 points, trading at 80,225.59 by 10:37 AM. The Nifty also dropped 332 points to hover at 24,216.60, reflecting widespread market weakness. All major sectoral indices and broader markets were in the red, with the volatility index surging 2.83 per cent.

FII Selling Adds Pressure

Foreign Institutional Investors (FIIs) sold Rs 3,560 crore worth of stocks on Thursday, exacerbating the market's downward spiral. The consistent selling pressure, fueled by India's high market valuations, has triggered profit-booking by FIIs, especially with the dollar's recent appreciation.

Rupee Hits Record Low

The rupee continued its slide, hitting an all-time low of 84.88 against the US dollar on Thursday. Despite interventions by the Reserve Bank of India through state-run banks, the weakening rupee has raised concerns of imported inflation, adding to market jitters.

Sectoral Declines Worsen Sentiment

Key sectors such as metals, IT, banking, and autos bore the brunt of the sell-off. Nifty Metal fell 2.01 per cent, with Tata Steel and JSW Steel declining nearly three per cent. Banking stocks also took a hit, with IndusInd Bank down 1.93 per cent.

Nifty IT and Nifty Auto indices dropped 1.23 per cent and 0.83 per cent, respectively, reflecting subdued investor sentiment across the board.

Inflation Offers a Silver Lining

On a positive note, India's November inflation cooled to 5.48 per cent, moving back within the RBI's target range. However, concerns remain over the dollar's strength, which could negate the benefits of easing inflation.

Market Outlook

The Nifty's immediate support is seen at 24,320, while resistance remains at 24,850. Analysts expect the market to trade within this range in the near term, with buying likely at lower levels. However, volatility could persist amid global and domestic uncertainties.