The Sensex and Nifty50 endured a challenging trading day on January 13, 2025, marking their fourth consecutive session of losses amid rising global economic tensions. The Sensex dropped more than 600 points, reaching an intraday low of 76,535, while the Nifty50 also fell below the 23,200 mark.
This decline follows a stronger-than-expected US jobs report, which dampened expectations of aggressive rate cuts by the Federal Reserve and intensified pressure on emerging markets.
Here are three critical factors investors should consider as the market navigates through turbulent conditions:
1. US Jobs Data Damps Rate Cut Hopes
The recent US nonfarm payrolls report revealed an addition of 256,000 jobs in December, well above expectations of 160,000. This unexpected surge in job creation has reduced the likelihood of multiple rate cuts by the US Federal Reserve in 2025. As a result, the US dollar has strengthened, leading to increased pressure on emerging market currencies, including the Indian rupee, which dropped to a record low of 86.39. This has exacerbated concerns about potential foreign institutional investor (FII) outflows.
2. Continued FII Outflows
Foreign institutional investors (FIIs) have withdrawn over $4 billion from Indian equities this month, following an $11 billion outflow in the previous quarter. These outflows are largely driven by uncertainties surrounding US monetary policy and the incoming US administration’s economic strategies. Additionally, rising Brent Crude prices, which have surged past $81 per barrel, have heightened inflation concerns, adding to the bearish market sentiment.
3. Market Volatility Expected to Persist
Experts predict that market volatility is likely to continue in the short term. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized that the market will remain under pressure from several strong headwinds. The US jobs data, indicating a robust labor market, has led to a reassessment of rate cut expectations for 2025, which had been a source of support for markets. Furthermore, concerns about rising oil prices and global economic uncertainty are adding to the negative outlook.
Looking ahead, Emkay Global anticipates that domestic markets could remain weak until March 2025, with potential stability expected in April as earnings forecasts improve and FII selling subsides. Meanwhile, ICICI Securities highlighted that anxieties surrounding US President-elect Donald Trump’s policies and the upcoming Budget 2025 could further contribute to market unease.
As volatility persists, market participants should remain cautious and prepared for continued uncertainty in the near term.
Related Topics:
5 Transformational Trends Shaping Global Finance
How Does Shorting the Stock Market Work
Expedite Resolution of Public Grievances: Financial Services Secretary to PSBs
