Sensex Falls 350 Points, Nifty Slips Below 26,100 as Investors Turn Cautious Ahead of US Fed Meet

The Indian equity markets witnessed broad-based weakness on Monday, with benchmark indices Sensex and Nifty sliding as investors booked profits across key sectors. Persistent foreign institutional investor (FII) outflows, a weaker rupee, firmer crude oil prices, and rising market volatility further weighed on sentiment. Caution ahead of the upcoming US Federal Reserve policy meeting also kept traders on the sidelines.

At around 11 a.m., the Sensex fell 346.50 points, or 0.40%, to 85,365.87, while the Nifty50 declined 123.85 points, or 0.47%, to 26,062.60, slipping below the crucial 26,100 level.

Broad Market Snapshot: Heavy Profit Booking and Negative Market Breadth

The selloff was led by sectors such as realty, banking, and automobiles, where traders took profits after recent gains.
Market breadth remained firmly negative:

• 1,174 stocks advanced

• 2,418 stocks declined

• 201 stocks remained unchanged

In the Nifty50 pack, InterGlobe Aviation, Bharat Electronics, and ETERNAL were among the biggest losers, falling up to 7%.
On the other hand, HDFC Life Insurance Company and Tech Mahindra emerged as the top gainers, rising up to 1%.

Key Factors Behind the Market Decline

1) Caution Ahead of US Federal Reserve Meeting

The biggest drag on the market was investor caution ahead of the two-day Federal Open Market Committee (FOMC) meeting starting December 9.

According to Devarsh Vakil, Head of Prime Research, HDFC Securities:

• Investors are positioning cautiously ahead of the FOMC meeting

• Additional inflation releases and year-end portfolio adjustments are adding to the wait-and-watch sentiment

• Central banks in Australia, Brazil, Canada, and Switzerland are also scheduled to meet this week, although no major policy changes are anticipated outside the Fed

This global central bank activity has kept domestic markets nervous, with traders unwilling to take fresh positions until clarity emerges on Fed policy.

2) Persistent FII Outflows

Foreign institutional investors continued their selling streak, extending it to seven straight sessions.

• FIIs sold ₹438.90 crore worth of equities on Friday

• Continued outflows are adding pressure to the market, particularly in large-cap and high-liquidity names

The sustained selling has weakened market sentiment, especially ahead of a major global policy event.

3) Weak Rupee Adds to Pressure

The Indian rupee opened weaker and continued to slide in early trade:

• The rupee fell 16 paise to ₹90.11 against the US dollar

• It opened at ₹90.07 and slipped further due to strong dollar demand from corporates, importers, and foreign portfolio investors

Higher crude prices and steady FII outflows weighed on the currency, adding another layer of pressure on domestic equities.

4) Crude Oil Prices Edge Higher

Brent crude, the global energy benchmark, rose marginally:

• Brent crude was up 0.13% at $63.83 per barrel

Even a modest rise in crude can influence India’s markets due to its impact on:

• Import bills

• Inflation expectations

• Overall macro sentiment

Higher crude tends to trigger caution among equity traders, particularly in rate-sensitive sectors.

5) India VIX Inches Up, Signalling Higher Market Volatility

The India VIX, the volatility index measuring market uncertainty, climbed:

• India VIX rose 2.11% to 10.53

A rising VIX generally indicates:

• Higher market uncertainty

• Expectation of wider price swings

• Reduced risk appetite among traders

The uptick in volatility ahead of a major global policy meeting further contributed to Monday’s selloff.

Also Read: Kaynes Tech Shares Crash 12% as JPMorgan Warns Against ‘Bottom Fishing’; Kotak Flags Disclosure Mismatches

Technical Outlook: Key Levels to Watch

Despite Monday’s decline, analysts noted key technical levels that may guide market movement in the coming sessions.

According to HDFC Securities’ Devarsh Vakil:

• The Nifty regained momentum last week after moving above its near-term resistance at 26,100

• Immediate resistance is now placed at 26,300, followed by 26,500

• On the downside, the 25,950–26,000 zone is expected to act as a crucial support band

These levels will be closely monitored as traders navigate a volatility-rich environment amid global central bank actions.

Overall Market Mood: Risk-Off Sentiment Prevails

The combination of:

• Profit booking

• Global uncertainty ahead of Fed policy

• Weak rupee

• FII selling streak

• Rising crude oil

• Higher volatility index

created a risk-off mood across the market. The selling was broad-based, with midcaps and smallcaps also facing pressure, as seen in the weak market breadth.

With multiple global central bank meetings lined up and the Fed at the centre of attention, markets could remain choppy through the week.

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