Sensex, Nifty witness sharp decline ahead of US Fed policy decision

Indian equity markets witnessed significant declines on Monday as widespread selling intensified investor caution ahead of the U.S. Federal Reserve’s policy announcement this week. Foreign institutional investor (FII) outflows further dampened market sentiment.

The Sensex closed at 85,102.69, dropping 609.68 points (0.71%), after opening lower at 85,624.84 compared to the previous session’s close. The index continued its downward trajectory, hitting an intra-day low of 84,875.59 amid sustained selling pressure.

The Nifty followed suit, settling at 25,960.55 with a loss of 225.90 points (0.86%).

“Investor caution ahead of the Fed meeting drove a broad market retreat below the 26,000 threshold,” said Vinod Nair, Head of Research at Geojit Financial Services. “While strong domestic growth indicators and the RBI’s recent rate cut provided support, short-term sentiment remains clouded by global policy uncertainty, persistent foreign fund outflows, and rupee volatility.”

Nair added that fears of a potential unwinding of yen carry trades contributed to market nervousness, following a spike in Japanese bond yields to multi-year highs.

Major Sensex decliners included Tata Steel, Bajaj Finance, L&T, Mahindra & Mahindra, Hindustan Unilever, and Infosys. Tech Mahindra was the sole gainer among index constituents.

Sectoral indices mirrored the bearish trend, with Nifty Financial Services falling 0.70%, Nifty Bank declining 0.90%, and Nifty Auto dropping 1.23%. FMCG and IT sectors also closed lower by 1.20% and 0.29% respectively.

Broader markets experienced sharper corrections, with Nifty Smallcap 100 plunging 2.61% and Nifty Midcap 100 declining 1.83%. The Nifty 100 index fell 1.05%.

The rupee depreciated by 13 paise against the U.S. dollar to 90.06, weighed down by FII outflows, weak equities, and uncertainty surrounding the India-U.S. trade agreement.

Analysts expect continued rupee volatility within the 89.75–90.30 range this week, with markets awaiting key events including Federal Reserve policy decisions and India’s inflation data.

(With inputs from IANS)