SENSEX crashes 1,000 pts, NIFTY50 drops over 300 pts; here is why

The NIFTY50 and SENSEX closed the trading in deep red on Thursday with 1.4% losses respectively. The NIFTY50 tanked 360 points, while SENSEX crashed nearly 1200 points amid broader selloff in the IT stocks.

In addition, the geo-political worry aggravated Russia undertook massive attack on Ukraine's energy grid overnight. Experts predict the aggravating situaion could lead to widespread global war, thereby adding worry to the market participants

The market breadth went in the favour of declines entirely as only 4 stocks out of the NIFTY50 universe closed in green and 46 closed in the red.

Delay in rate cuts signal slowdown for IT stocks

IT stocks witnessed sharp fall during the mid market session after Federal Reserve indicated a gradual drop in the benchmark rate in the US. The stronger GDP growth at 2.8% in the Q3 of 2024 in the US give more headroom for the Federal Reserve to hold on to the current levels. Indian IT stocks are highly dependent on the spending in the US and other Developed economies for business.

A postponing of rate cut will dampen the outlook Indian IT stocks, thereby prompting a sharp sell-off in them. Following the development, NIFTY IT closed as top sectoral loser for the day pulling the index from day's high level to day's low.

Monthly Expiry

The sudden fall in the NIFTY50 can also be attributed to the monthly expiry related trading activity where, traders entered the new contracts with short positions. On a technical basis too, markets filled the gap created by opening 310 points higher on the NIFTY50 on Monday, 25th November.

Heating geo-politcal tensions

According to the New York times report, Biden administration is planning to arm Ukraine with nuclear weapons. This move could lead the position to aggravate further with consequences putting global peace and stability in danger.

Wall Street's main indexes closed lower on Wednesday, with the Nasdaq leading declines, as technology stocks slumped on Thanksgiving Eve on worries the Federal Reserve may be cautious about rate cuts after stubbornly strong US inflation data.

According to preliminary data, the S&P 500 lost 22.85 points, or 0.38%, to end at 5,998.78 points, while the Nasdaq Composite lost 113.80 points, or 0.59%, to 19,061.78. The Dow Jones Industrial Average fell 136.31 points, or 0.31%, to 44,723.23.

Dell slumped 12%, and HP dropped almost 6% after downbeat quarterly forecasts, weighing on the Information Technology sector, which dropped 1.2%.

The sentiment spread to megacaps such as Nvidia and Microsoft.