NIFTY50 close below 22,000, SENSEX falls 790 points, key reasons behind today’s market fall

The domestic market saw a sharp fall on Wednesday with benchmark NIFTY50 (-1.1%) index closing below 22,000 mark and the SENSEX down by 790 points. Out of the NIFTY50 space, 46 stocks closed in red.

India VIX, a measure of volatility in the domestic markets, rose 3.8%. All of the NIFTY sectoral indices ended lower with Media (-3.4%) and PSU Bank (-2.3%) being the top losers. Here are the key reasons behind today’s market fall:

Markets on shaky ground ahead of key US economic data

Markets are facing uncertainty ahead of the second estimate of the US economic data that will be announced later in the day. The US consumer spending numbers for the fourth quarter will also be announced today.

These economic data hold significance to global markets. The US Fed’s decision to reduce interest rates will be based on these numbers. As per experts, the US Fed's rate cut decision may be delayed amid unfavourable economic data. For instance, the annual inflation rate in the US stood at 3.1% in January 2024 which is higher than forecasts of 2.9%.

Consistent selloff by foreign investors

The Foreign investors (FIIs) have been consistent sellers of Indian equities for the second month in a row. Till 27 February, FIIs have sold shares worth ₹17,651 crore. In January, FIIs sold equities worth nearly ₹36,000 crore. Consistent selling by foreign investors have impacted investors sentiment and possibly contributed to the overall market fall.

Midcap and Smallcap indices tumble

Broader market indices NIFTY Midcap 100 (-1.9%) and Smallcap100 (-1.8%) declined substantially today. As per reports, market regulator SEBI has asked asset management companies (AMC) to tighten risk disclosure norms for their small and mid-cap funds.

SEBI has asked AMCs to give investors more information about the risks associated with these funds as small and mid-sized funds have seen high inflows in recent years, causing concern among authorities about how these funds will react in the event of a sharp market selloff.