The Indian stock market crash sharply on December 17, 2024, with benchmark indices Sensex and Nifty50 recording heavy losses for the second consecutive session. In this article, we analyse the main reasons behind the market decline and provide insights to help investors navigate through the tough times.
Market Summary
Sensex: fell 1,064.12 points (-1.3%) to close at 80,684.45.
Nifty50: Down 348 points (-1.4%) to close at 24,320.30.
In intraday trade, the Sensex fell as much as 1,136 points to hit a low of 80,612.20, while the Nifty50 hit a daily low of 24,303.45.
Key reasons behind stock market crash
1. Nervousness ahead of US Federal Reserve meeting
Investors across the world are nervous ahead of the US Federal Reserve’s monetary policy announcement on December 18. While a 25 basis point cut is widely expected, uncertainty looms over the path of the Fed’s next rate cut in 2025.
“Any deviation from the dovish view could have a negative impact on global markets,” said V K Vijayakumar, chief investment officer at Geojit Financial Services.
2. Selling pressure from foreign institutional investors (FIIs)
Reports that China is planning to increase its budget deficit to 4% by 2025 are fueling speculation of a reversal in FII flows. The ‘sell India, buy China’ sentiment could work against Indian stocks, though experts believe this is a temporary phenomenon.
3. Widening trade deficit
India’s trade deficit widened to $37.8 billion in November, raising concerns about a weak rupee. The rupee’s depreciation to 85 against the US dollar could help exporters like IT and pharmaceuticals, but hurt import-heavy sectors.
4. Weak global cues
Asian markets showed mixed patterns, with the MSCI Asia-Pacific Index down 0.3%. European markets also pointed to a weak opening, adding to bearish sentiment globally.
5. Technical cues
The rise in the volatility index (VIX) is indicative of heightened caution among investors. Analysts suggest that further consolidation is likely if the Nifty50 breaks its key support levels.
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What should investors do?
1. Stay invested in quality stocks
Focus on strong companies in sectors like IT, pharmaceuticals and FMCG, which tend to perform well in volatile times.
2. Diversify your portfolio
A balanced mix of stocks, debt instruments and gold can reduce overall risk.
3. Monitor global events
Keep an eye on central bank meetings, trade data and geopolitical developments, which can have a significant impact on market trends.
4. Don’t panic and sell
Market corrections are temporary. Selling too quickly can lead to missed opportunities when the market recovers.
Conclusion
The recent stock market crash highlights the importance of staying informed and prepared. While global signals and macroeconomic conditions play an important role, systematic investing and a long-term outlook are always the best way to weather market fluctuations.
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Frequently Asked Questions
1. Why did the stock market crash on December 17, 2024?
The decline was due to investor caution ahead of the US Federal Reserve meeting, concerns over IFI outflows and widening trade deficit.
2. Which sectors were hit the hardest?
PSU Banks, Oil & Gas and Automobile sectors saw significant declines.
3. What should investors do during a market crash?
Investors should remain calm, avoid panic selling and focus on quality stocks and portfolio diversification.
