By Vineet Kumar 
Sensex Gains 730 Points: Key Factors Behind Stock Market Volatility
The stock market witnessed a dramatic turnaround today, with the Sensex rebounding 730.39 points to close at 82,020.35, and the Nifty50 climbing 192.70 points to 24,741.40 by 3 PM. The recovery followed an intense sell-off earlier in the day when the Sensex nosedived over 1,100 points amid widespread concerns about inflation, interest rates, and foreign investor activity.
Let’s break down the three major reasons behind today’s market volatility.
1. Foreign Investor Selling and Rupee Depreciation
Foreign Institutional Investors (FIIs) continued to offload equities, selling ₹3,560.01 crore worth of stocks on Thursday. This selling spree extended into Friday, fueled by concerns over Indian market overvaluation compared to global peers.
Adding to investor worries was the Indian rupee hitting a record low against the US dollar on Thursday. The strengthening dollar, supported by robust US economic data and high bond yields, has exerted downward pressure on the rupee.
According to Vishnu Kant Upadhyay, AVP of Research & Advisory at Master Capital Services Ltd., “Persistent foreign investor outflows and rising onshore forward premiums are adding pressure on the rupee. This volatility reflects global headwinds overshadowing India’s easing inflation data.”
2. Inflation and Interest Rate Concerns
Although India’s CPI inflation for November stood at 5.5%, within the RBI’s target range, concerns remain over elevated food prices. Economists fear this could delay interest rate cuts by the central bank.
Former RBI Governor Shaktikanta Das warned that persistent food price pressures could pose medium-term challenges despite inflation being within range. The uncertainty surrounding monetary policy has kept markets on edge, leading to sharp intraday fluctuations.
3. Valuation and Corporate Earnings Pressure
Indian equities have faced criticism for being overvalued compared to global benchmarks, prompting profit-booking by investors. Adding to this were disappointing corporate earnings from specific sectors, which dampened market sentiment.
Market analyst Anupam Roongta noted, “Sharp sell-offs across metal, banking, and realty stocks dragged the market earlier in the day. India VIX surged 7.7% to 14.20, indicating heightened market volatility. However, the Nifty50 bounced back, successfully crossing its 50-day moving average, with support at 24,300 and resistance at 24,860.”
Broader Implications
Today’s recovery was led by gains in FMCG and IT sectors, showcasing resilience amid a volatile environment. However, market participants remain cautious due to the interplay of global headwinds, currency fluctuations, and domestic inflation concerns.
As markets navigate this turbulent phase, all eyes will be on key levels and policy cues in the coming days.
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