Sensex tumbles 600 points today. 3 reasons why stock market is falling

Stock market today: Multiple factors were behind today's nervousness on Dalal Street, including weaker growth estimates for FY25, worries over Q3 corporate earnings and the likelihood of fewer US rate cuts.

In Short

• Sensex drops 600 points as Dalal Street turbulence continues
• Investor concerns rise over subdued Q3 corporate earnings
• Fewer US rate cuts dampen technology and financial stocks

Benchmark stock market indices tumbled again on Wednesday as the turbulent run on Dalal Street continued after a 1-session gain. The S&P BSE Sensex fell 553.10 points to 77,646.01 at 1:11 pm, while the NSE Nifty50 fell 163.05 points to trade at 23,544.85.

Multiple factors were behind today’s nervousness on Dalal Street, including weaker growth estimates for FY25, worries over Q3 corporate earnings and the likelihood of fewer US rate cuts.

Q3 CORPORATE EARNINGS

One of the key triggers behind today’s decline is nervousness among investors over the outcome of Q3 corporate earnings. Early trends suggest that the earnings season will be subdued and it has already started hurting investor sentiments.

It is worth noting that recent quarterly updates from companies including Dabur India and Hero MotoCorp did not give the market hope that corporate profit growth in the December quarter would be any better than the previous quarter, which was the worst in four years.

Kranthi Bathini, director of equity strategy at Wealthmills Securities, told news agency Reuters that the business updates from companies have heightened worries of earnings moderation, which is “weighing on sentiment and triggering a drop in domestic equities ahead of the results season”.

FEWER US RATE CUTS LIKELY

Another reason behind today’s decline was a sharp tumble in technology and financial stocks, which fell after US data signalled at a stable economy and labour market, diminishing prospects of future rate cuts by the Federal Reserve.

The Nifty IT index was down 0.5% during the session; Nifty Bank and Nifty Financial Services indices also fell sharply during the session and pulled down the benchmark indices.

It was only due to heavyweight stock Reliance, which rose 2%, that the losses were limited on Dalal Street.

GDP GROWTH ESTIMATE SLIPS

A day ago, the first advance estimates released by the government indicated that GDP growth in FY25 may slow down sharply to 6.4%, marking a 4-year low. The growth estimate for FY25 is also sharply lower than FY24’s 8.2%.

This may have led to some nervousness on Dalal Street. However, analysts said that it may not be a major trigger behind today’s weakness.

Trivesh D, COO at Tradejini, said, “Markets often anticipate economic data, reacting to expected changes before the official figures are out. The forecasted GDP slowdown is not new information for investors; thus, the impact on equity markets might have already been absorbed.”

“If not entirely, only minor movements may follow, unless there’s a further downward revision in growth expectations,” he added.