Markets retreat as investors await Fed’s rate decision

The stock markets closed lower on Monday, with the Sensex and Nifty experiencing a subdued trading session ahead of the crucial U.S. Federal Reserve’s FOMC meeting. The benchmark indices pulled back from recent gains, reflecting cautious investor sentiment amid mixed global cues and upcoming economic policy decisions.

The Sensex closed 384.55 points or 0.47 per cent lower at 81,748.57, while the Nifty 50 ended 100.05 points or 0.4 per cent down at 24,668.25. Market breadth remained positive, with 2,346 advances against 1,796 declines on the BSE, indicating underlying market resilience despite the day’s losses.

Sectoral performance was mixed, with the realty sector emerging as a standout performer. “The realty sector outperformed in expectation of growing demand and a potential rate cut cycle in 2025,” noted Vinod Nair, Head of Research at Geojit Financial Services. The sector gained over 3 per cent, buoyed by optimistic expectations of future growth.

Also read: Market volatility grips D-Street: Sensex, Nifty slide amid sectoral divergence

Contrary to the realty sector’s performance, metal and IT stocks faced significant pressure. Top losers included Titan (-1.93 per cent), Adani Ports (-1.38 per cent), Hindalco (-1.37 per cent), TCS (-1.29 per cent), and Tech Mahindra (-1.24 per cent).

On the gainers’ side, Dr. Reddy’s Lab led with a 1.74 per cent increase, followed by IndusInd (1.22 per cent), HDFC Life (0.46 per cent), Power Grid (0.27 per cent), and Bajaj Finance (0.24 per cent).

The market’s cautious tone was attributed to multiple factors. “Domestic equities took cues from Asian and European indices,” said Prashanth Tapse from Mehta Equities, “with investors awaiting the outcome of the US FOMC meeting on rate decision later this week.” The uncertainty surrounding potential import tariffs and concerns about the sluggish Chinese economy further contributed to investor hesitancy.

Economic indicators provided some positive signals. India’s wholesale price inflation eased to 1.89 per cent in November, a three-month low due to falling food prices. Additionally, the HSBC December flash India Composite PMI rose to 60.7, indicating the fastest private sector output growth in four months.

Technical analysts offered mixed perspectives on the market’s trajectory. Shrikant Chouhan from Kotak Securities suggested a non-directional market texture, recommending traders to “buy on intraday corrections and sell on rallies.” Nagaraj Shetti from HDFC Securities maintained a cautiously optimistic view, stating that “the near-term uptrend of Nifty remains intact” and the current consolidation could present a “buy-on-dip opportunity.”

The India VIX, a measure of market volatility, surged over 10 per cent intraday before settling 7 per cent higher at 14, reflecting the market’s uncertain sentiment. Broader indices showed resilience, with the Nifty Midcap and Smallcap indices outperforming the benchmark by rising 0.77 per cent and 0.64 per cent respectively.

Investors are now keenly awaiting key policy decisions from the Federal Reserve, Bank of Japan, and Bank of England. “Markets are currently struggling with a lack of strong triggers,” observed Gaurav Garg from Lemonn Market Desk, “but there is a high probability of rate cuts that may trigger a good rally in the US market.”

As the trading week begins, analysts suggest market participants remain vigilant, monitor global cues, and focus on stock-specific movements in the coming days.