Indian Stock Market on 19.12.24

Wall Street managed a cautious bounce on Thursday, clawing back some of Wednesday’s brutal losses. After the Fed’s latest projections flipped expectations on rate cuts and stoked inflation worries, the markets got a reality check. A tiny 0.4% gain on the S&P 500 and a 194-point lift for the Dow feel like baby steps compared to Wednesday’s 2.9% drop in the S&P and the Dow’s jaw-dropping 1,100-point tumble.

Indian equity markets were caught in a tailspin on Thursday, with the Sensex plunging 964 points and the Nifty dropping 247 points by the closing bell. Sun Pharma and Cipla managed to stay afloat, but heavyweights like Asian Paints and Grasim Industries dragged the indices deeper. Even smaller indices couldn’t dodge the storm: the BSE Mid Cap stayed flat, and the Small Cap dipped 0.6%. Most sectors mirrored Wall Street’s gloom, with banking, IT, and capital goods stocks taking the brunt. Meanwhile, healthcare stocks provided a rare glimmer of green amid a sea of red.

This is now four straight sessions of red for Indian markets, leaving the Nifty more than 9% off its September peak.

Diving into numbers, the Nifty’s trailing P/E ratio sits at 22.6x, right on its three-year average. But things get frothy in smaller segments—mid-cap and small-cap indices are trading at hefty premiums of 32% and 18%, respectively, over their three-year averages. That’s not sustainable, especially as foreign institutional investors (FIIs) are reallocating funds to Chinese equities, pulling ₹45,974 crore out of Indian markets in November alone.

It’s not just equities feeling the pressure. Gold with a one-month low before bouncing back 0.6% to $2,603.60 per ounce, while silver and palladium made modest gains. Meanwhile, oil prices stabilized after a two-day drop, with Brent crude remaining above $73 per barrel.