• Major Losers: Tata Steel and JSW Steel led the decline, both falling by 3%. Private sector banks like IndusInd Bank and Axis Bank recorded losses of up to 2.5%. NTPC, Bajaj Finserv, Mahindra & Mahindra, and ITC also slipped by up to 2%.
• Sector-Wide Impact: Out of the actively traded stocks, 2,298 out of 3,378 declined, with around 90 stocks hitting their lower circuit limits and 19 stocks touching 52-week lows.

Factors Contributing to the Decline

1. Foreign Portfolio Investors (FPI) Selling

FPIs turned net sellers, offloading equities worth ₹3,560 crore on Thursday. Despite a positive trend in December, high market valuations and the appreciating US dollar prompted this selling spree.

"FPIs have been selling more at every rise in Indian markets due to high valuations and the strengthening dollar," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

2. Global Cues

• Weak Asian Markets: Key indices in China, Hong Kong, and Japan declined due to the absence of fresh fiscal stimulus announcements at China’s Central Economic Work Conference.
• Strong US Dollar and Bond Yields: The US dollar index rose by 0.15% to 107.11, while the 10-year bond yield climbed to 4.324%, creating pressure on emerging markets.

3. Concerns Over China’s Yuan Devaluation

Reports suggest that China may consider devaluing its Yuan amidst fears of a trade war with the US. This development added to the nervousness in global markets.

Technical Analysis and Market Outlook

Analysts highlight critical support levels for the Nifty at 24,430, with immediate resistance at 24,700.

"The Nifty holding above the 50- and 89-day EMA near 24,400 will be crucial for maintaining bullish momentum," noted Sameet Chavan, Head Research at Angel One. "Traders should align their strategies with key technical levels and monitor global trends."

Meanwhile, Akshay Chinchalkar, Head of Research at Axis Securities, emphasized the importance of maintaining support at 24,500 to prevent further market erosion.

Conclusion

Friday's sell-off highlights the fragility of the current market sentiment, influenced by both global uncertainties and domestic factors like FPI behavior. Traders and investors should remain cautious, focusing on technical support zones and global developments for navigating the upcoming trading sessions.