Sensex plunges 1,064 points ahead of US Fed meet on Wednesday

FPIs pulled out Rs 6,409 crore from the cash market on Tuesday.

Analysts said globally, markets will be looking forward to the US FOMC outcome on Wednesday. Markets have already discounted a 25-basis point (bp) rate cut and, therefore, the focus will be on the Fed chief’s commentary. “Any departure from a dovish commentary will be a negative from the market perspective. This is only a remote possibility. The US Services PMI coming strong at 58.5 per cent indicates a resilient economy, which augurs well for the market,” said an analyst.

IT, pharma industry may gain from weaker rupee

The sharp spike in India’s trade deficit to $37.8 billion in November will put pressure on the rupee pushing it towards 85 to the dollar. Exporters like IT and pharma will benefit from depreciating rupee but import cost will increase. This will have an impact on their stock prices, he said.

“Widespread pessimism prevails across all sectors ahead of key policy decisions from the US Fed, BoJ, and BoE. While the market has already factored in a 25-bp cut from the US Fed, it remains vigilant for any hawkish signals,” said Vinod Nair, head of research, Geojit Financial Services. The BoJ and BoE are largely expected to maintain their current rates for the year. Concurrently, the rupee has depreciated to a new low, and a record-high trade deficit is exacerbating the pressure. FPI outflows persist due to rising US bond yields and a strengthening dollar, further contributing to the prevailing pessimism.

The rupee depreciated to a new low of 84.93 per dollar intra-day on Tuesday and closed flat at 84.90 due to the widening of India’s merchandise trade deficit in November and selling in domestic equities. Markets remained focused on the US Fed’s final policy decision of the year scheduled for December 18, 2024.

“While a 25-bp rate cut has already been factored in, forward commentary and projections will be key. A dovish tone could push the dollar index lower, providing relief for the rupee. However, any uncertain or hawkish remarks may strengthen the dollar and keep participants bearish on the rupee. The rupee’s range is anticipated between 84.75 and 85.05,” said Jateen Trivedi, research analyst, commodity and currency, LKP Securities.