In today’s session, the 30-share Sensex plunged as much as 713 pts to 83,021 or 0.7% lower. The 50-share Nifty declined 0.83% or 214 points to 25,604.
Here are the key factors behind today’s market decline
1) US Fed rate cut uncertainty
Federal Reserve officials remained split over what might happen next, with “several” policymakers raising the risk of possible hikes in borrowing costs if inflation remains elevated, and others split over whether and when further cuts might be warranted, according to minutes of their January 27-28 meeting. “Some” others felt rates would need to be on hold “for some time” while they awaited new inflation and economic data, with a subset of that group arguing that cuts may not be appropriate at all until there is evidence that “disinflation is back on track.” If the US Federal Reserve delays rate cuts or raises rates, it is negative for Indian equities because higher US yields make American assets more attractive relative to emerging markets. This can trigger foreign portfolio outflows from India, pressuring the rupee and tightening domestic liquidity.
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2) Rising oil prices
Oil prices edged higher in Asian trade on Thursday as the U.S. and Iran sought to defuse tensions over Tehran’s nuclear programme, even as both sides stepped up military activity in the key oil-producing region. Brent crude rose 24 cents, or 0.3%, to $70.59 a barrel by 0415 GMT, while U.S. West Texas Intermediate (WTI) gained 28 cents, or 0.4%, to $65.47.
Both benchmarks had surged more than 4% on Wednesday, marking their highest settlements since January 30, as traders factored in potential supply disruptions amid concerns of a U.S.–Iran conflict. The White House said some progress was made in talks held in Geneva this week, though differences remain on certain issues, with Tehran expected to return with further details in the coming weeks.
3) Geopolitical tensions linger
A significant US military buildup in the Middle East — including the deployment of warships, fighter jets and aerial refuelling aircraft — has positioned Washington for a potentially sustained campaign against Iran, should President Donald Trump authorise action, AFP reported.
Trump, who ordered strikes on Iran last year, has repeatedly warned of further military measures if ongoing negotiations fail to produce a replacement for the nuclear agreement he withdrew from in 2018 during his first term.
On the Russia-Ukraine front, two days of peace talks between the tow in Geneva concluded on Wednesday without a breakthrough, as Ukrainian President Volodymyr Zelenskiy voiced dissatisfaction with the outcome even as Washington described the discussions as having achieved “meaningful progress.” In his nightly video address, Zelenskiy said the results so far were not adequate.
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4) Profit booking
Frontline indices Nifty and Sensex rose for three consecutive sessions before today’s decline on the back of investors booking profits at elevated levels. “We will go in today, continuing to expect 25,900, while also seeing a fair possibility of testing 26,050. However, we are uncertain of the momentum sustaining beyond the same. This prompts the downside market to pull up to 25,728,” Anand James, Chief Market Strategist at Geojit Investments Ltd, said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)