Why Is Stock Market Falling Today? Key Factors Behind Sensex, Nifty Decline On December 9

Why is Indian Stock Market Falling Today?

Why is Indian Stock Market Falling Today? Indian equities extended their decline on Tuesday, with the Sensex and Nifty continuing the previous session’s sharp slide as caution prevailed ahead of the U.S. Federal Reserve’s rate decision and uncertainty surrounding a potential U.S.–India trade agreement.

The S&P BSE Sensex dropped 700 points to slip below 84,400, while the NSE Nifty 50 fell 200 points to trade under the 25,750 mark, as risk appetite remained subdued following their steepest fall in over two months.

Here are the key factors dragging markets lower:

1. Jitters ahead of the U.S. Fed decision

Investors turned cautious ahead of the US Federal Reserve’s policy announcement on December 10 — a meeting that has gained significance after weeks of shifting rate expectations. While a 25-basis-point cut is broadly anticipated, retail investors have been trimming positions to hedge against the possibility of a surprise status quo, which could strengthen the dollar and worsen pressure on domestic equities already dealing with a weaker rupee and sustained foreign selling.

Devarsh Vakil, Head of Prime Research at HDFC Securities, said “While the cut is widely expected, markets will focus on the Fed’s statement for signals about 2026 rate policy. The Fed will release its policy statement, updated economic projections, and Chair Jerome Powell will hold a press conference. Investors expect 2–4 additional cuts in 2026 unless economic data shifts significantly.”

The anxiety was compounded by a heavy global central-bank calendar. The Reserve Bank of Australia, Swiss National Bank and Bank of Canada are all expected to hold rates steady, while the Fed is widely tipped to ease on Wednesday.

What lies ahead remains uncertain. Bond markets are now pricing in a shallower U.S. easing cycle, with several Wall Street banks forecasting fewer rate cuts in 2026 as stubborn inflation and resilient U.S. economic data reduce the scope for aggressive policy support.

2. Global markets under pressure

Weak sentiment across Asia added to the cautious mood in Indian equities. Investors stayed on the sidelines ahead of the expected U.S. rate cut and a week packed with central-bank decisions. The dollar stayed firm, and the yen held steady despite a strong earthquake in northeastern Japan that caused minimal disruption.

Regional trading remained muted with the RBA set to announce its policy outcome later today, followed by the SNB and BoC decisions this week — all expected to keep rates unchanged.

Bond traders have already begun pricing in a milder U.S. rate-cut trajectory for 2026 as inflation remains sticky and economic indicators stay strong. This backdrop weighed on equities, with MSCI’s Asia-Pacific ex-Japan index slipping 0.28%. The Nikkei edged down 0.08%, and South Korea’s Kospi dropped 0.58%.

3. Foreign outflows deepen

Persistent selling by foreign investors continued to weigh on Indian markets, with overseas funds extending their withdrawal streak into December. On December 8, Foreign Institutional Investors (FIIs) sold around Rs 656 crore worth of equities, even as Domestic Institutional Investors (DIIs) absorbed some of the pressure with net purchases of Rs 2,542 crore.

The pace of outflows has quickened significantly over the past two months. FIIs have already offloaded Rs 6,618 crore so far in December, after pulling out Rs 11,592 crore in November—a sharp reversal from the modest Rs 918.80 crore of net buying seen in October.

“Sustained rupee depreciation has been compelling FIIs to sell continuously. Adding to this is the spike in Japanese bond yields, which could trigger further unwinding of the yen carry trade. In short, the market faces the potential for elevated volatility,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

4. Nifty expiry sparks volatility

The Nifty’s weekly derivatives expiry injected additional volatility into Tuesday’s trade, as investors navigated sharper intraday swings ahead of the December 9 F&O expiry. Weekly contracts typically attract tighter regulatory monitoring and heavier rollover activity, which can magnify market reactions as outstanding positions are squared off.

Such sessions often witness sharp, one-sided moves depending on how traders unwind their futures and options positions, leaving the broader market vulnerable to abrupt momentum shifts.

5. Rupee weakness adds pressure

A weakening rupee added further strain on domestic equities, with the currency slipping 10 paise to Rs 90.15 per dollar in early trade on Tuesday. Persistent dollar demand from corporates, importers and FPIs kept sentiment fragile as traders awaited the U.S. Federal Reserve’s policy decision.

At the interbank forex market, the rupee opened at Rs90.15, extending losses after touching a fresh record low of Rs 90.46 on December 4. The decline was partly linked to delays in the India–U.S. trade agreement and ongoing FII outflows, both of which have intensified downward pressure on the currency.