The domestic equity market witnessed sharp intraday volatility on Monday as early optimism gave way to profit booking, weak global cues, and mounting concerns over the interest-rate outlook. After scaling fresh lifetime highs in early trade, both the Sensex and Nifty reversed sharply by noon as the Indian rupee dropped to a record low and investors reassessed the sustainability of the recent rally.

Despite a strong GDP print last week, the sentiment across Dalal Street turned cautious, reminding traders that markets often react more to expectations than headline numbers.

Markets Hit Record Highs Before Reversing

In the opening session, Indian equities started on a strong note, mirroring the strength seen in the past few trading days.

• The Sensex jumped 452.35 points to touch a new peak of 86,159.02, surpassing its previous high from November 27.

• The Nifty surged 122.85 points to hit a fresh all-time high of 26,325.80.

However, the early optimism was short-lived.

By 11:30 am, the Sensex had slipped more than 300 points from its day’s high to 85,848.18, while the Nifty retreated below the 26,250 mark to 26,243.70.

Market breadth also weakened as selling pressure intensified:

• 1,961 shares advanced

• 1,687 shares declined

• 214 shares remained unchanged

Among the Nifty50 stocks, Titan, Bajaj Finance, and Sun Pharmaceutical Industries emerged as notable laggards, falling up to 1%. On the other hand, Kotak Mahindra Bank and Adani Ports & SEZ stood out as top gainers, rising nearly 2%.

Also Read: Gold Up 1% to ₹1.30 Lakh; Silver Surges on Rate-Cut Hopes

5 Key Reasons Behind Today’s Market Decline

Despite record-breaking GDP figures, the stock market faced multiple headwinds. Here are the five major reasons behind the sudden reversal:

1) Rupee Hits All-Time Low Despite Strong GDP

The biggest sentiment shock came from the currency market.

The Indian rupee fell to a lifetime low of 89.61 against the US dollar on Monday, slipping past its previous record of 89.49 seen two weeks earlier.

This marks a sharp depreciation of nearly 90 paise since November 3, an unusual move given India’s strong Q2 GDP print.

A sliding rupee typically:

• Raises import costs

• Pressures corporate margins

• Signals risk aversion among foreign investors

This fresh all-time low added immediate pressure on equities, especially sectors dependent on imports.

2) RBI Rate Cut Now Unlikely After Strong GDP

One of the biggest drivers of the recent rally was the expectation that the RBI may consider a rate cut in its upcoming policy meeting on December 5. But the narrative shifted dramatically.

After the stronger-than-expected GDP growth, markets believe the central bank now has less room to ease policy.

The bond market mirrored this sentiment:

• The benchmark 10-year bond yield spiked from 6.47% to 6.52% on Friday.

Higher yields indicate a reduced probability of monetary easing.

Brokerage Barclays noted that it no longer expects a rate cut at the upcoming policy meeting, emphasizing that robust GDP growth outweighs the impact of low October inflation. It expects the RBI to hold rates steady while turning slightly dovish in its commentary.

Dr. V.K. Vijayakumar of Geojit Financial Services added that the economy “doesn’t need monetary stimulus when it is firing on all cylinders,” indicating that expectations of policy support may have been premature.

This shift in expectations removed a key pillar of support for rate-sensitive sectors like banks, autos, and real estate.

3) Weak Global Cues Pressure Domestic Sentiment

Global markets also weighed on Indian equities.

Asian indices were trading lower:

• South Korea’s Kospi

• Japan’s Nikkei 225

Meanwhile, US futures were down by up to 1%, signalling a weak start for Wall Street.

Globally, investors turned cautious due to concerns surrounding interest rates, slowing demand in major economies, and geopolitical uncertainties. With global sentiment shaky, local traders opted to lock in profits after the morning surge.

4) FII Selling Continues

Foreign Institutional Investors (FIIs) contributed significantly to the pressure.

On Friday alone, FIIs sold equities worth ₹3,795.72 crore, continuing their streak of outflows. Persistent selling by foreign investors often acts as a drag on the markets, particularly during periods of volatility.

With the rupee weakening and US rate expectations fluctuating, FIIs appear to be booking profits and reducing exposure.

5) Rise in Crude Oil Prices Adds to Concerns

Crude oil prices, another critical macro factor, also moved unfavourably.

Brent crude surged 1.62% to $63.39 per barrel.

Higher crude prices typically hurt India due to its heavy reliance on oil imports. They:

• Increase inflationary pressures

• Widen the trade deficit

• Hurt consumption and margins in petroleum-dependent industries

The rise in oil added yet another layer of caution for equity investors already navigating currency weakness and shifting interest-rate expectations.

The Bottom Line: Markets Pause After Sharp Rally

Monday’s decline reflects a combination of domestic and global headwinds coming together at the same time. While India’s macro picture remains strong—especially with the recent GDP surge—markets are recalibrating based on realities such as:

• Rupee weakness

• Reduced hopes of a near-term RBI rate cut

• Rising crude prices

• Ongoing FII selling

• Soft global sentiment

Investors now look ahead to the December 5 RBI policy meeting, global macro cues, and movement in crude and currency markets to determine the next direction for equities.

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