IT Stocks Slide, Powell's Rate Cut Remarks, and More: 7 Key Reasons Behind Today's Sensex and Nifty Decline

On Monday, 18th November, Dalal Street experienced a bearish trend in a shortened trading week, as key indices, Sensex and Nifty, plunged under the weight of continued foreign fund outflows, selling pressure in IT stocks, and cautious comments by US Federal Reserve Chairman Jerome Powell about rate cuts.

The Nifty, which showed a brief attempt at recovery earlier in the session, struggled to maintain momentum and traded 0.69% lower at 23,369.85 by 11:15 AM. This represents a significant 10% correction from its all-time peak in September, breaching multiple support levels and marking the steepest drop in four years since the onset of the pandemic.

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Key Drivers of Market Decline

1. Citi Lowers Rating for Indian Stocks: Global brokerage Citi downgraded Indian equities, highlighting concerns over diminishing earnings growth. Disappointing September-quarter results have further dampened sentiment, eroding investor confidence.
    
2. Powell's Comments on Rate Policy: US Federal Reserve Chairman Jerome Powell signaled a measured approach to rate cuts, emphasizing the strength of the US economy. “If the data allow us to proceed a little slower, that seems a smart thing to do,” he noted. Higher borrowing costs in the US have boosted the appeal of American assets, such as bonds, drawing capital away from emerging markets like India and bolstering the dollar.
    
3. IT Stocks Under Pressure: The Nifty IT index fell nearly 3% as Powell’s cautious stance unnerved investors. Heavyweights including Tech Mahindra, TCS, Infosys, and Wipro recorded losses of 2-4%, while mid-cap IT firms like Coforge, Persistent Systems, L&T Technology Services, and Mphasis dropped 1-2%.
    
4. Geopolitical Concerns: Geopolitical tensions also weighed on markets, with US President Joe Biden authorizing Ukraine to use US-supplied missiles for deeper strikes into Russia. Meanwhile, reports emerged regarding the health of Iran’s Supreme Leader Ayatollah Ali Khamenei, further intensifying global uncertainties.
    
5. Continued FII Selling: Foreign Institutional Investors (FIIs) sold shares worth ₹1,849.87 crore on Thursday, pushing November’s total outflows to ₹22,420 crore. Elevated domestic valuations, a shift in focus to Chinese markets, and a strong dollar coupled with rising US Treasury yields have fueled this selling spree. “Despite the Nifty’s 10.4% correction from its peak, there are no clear signs of a sustained recovery. Persistent FII selling, downgraded FY25 earnings expectations, and geopolitical as well as macroeconomic challenges continue to exert pressure,” noted Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
    
6. Volatility Index Jumps: The India VIX, which reflects market volatility expectations, climbed 5% to 15.51, signaling heightened trader anxiety and ongoing uncertainty. Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd., added, “Weak cues from Wall Street and rising US bond yields exacerbate concerns.”
    
7. Rupee Remains Under Stress: The rupee, which has faced headwinds from inflationary pressures and surging US Treasury yields, gained 8 paise to settle at ₹84.38 against the dollar in early trade. However, with the dollar index steady at 106.6 and the 10-year US bond yield at 4.44%, a swift reversal in FII outflows seems unlikely.
    

“Considering the current strength of the dollar and prevailing global conditions, Indian markets may not witness immediate relief from capital outflows,” Vijayakumar added.