Markets Slip as FII Selling, Weak Rupee Drag Sensex and Nifty Lower

Indian equity benchmarks ended lower on Friday as profit booking and continued foreign institutional investor (FII) selling weighed on market sentiment during a holiday-shortened trading week.

At around midday, the Sensex was down over 360 points, while the Nifty slipped below the 26,050 mark. Broader market breadth remained weak, with declining stocks outnumbering advances.

Despite the day’s decline, both indices remained marginally higher for the week, set to end a three-week losing streak. Gains in metal stocks, supported by improving demand from China, a softer US dollar, and a stable US economic outlook, helped limit deeper losses.

Key Reasons Behind the Market Decline

Rupee Weakness:
The Indian rupee depreciated sharply against the US dollar, hitting levels near 89.94, pressured by foreign fund outflows, importer demand for dollars, and rising crude oil prices. Currency markets had remained shut on Thursday due to the Christmas holiday, adding to volatility on reopening.

Sustained FII Selling:
Foreign institutional investors continued to offload Indian equities, selling shares worth over ₹1,700 crore in the previous session, marking the third straight day of net outflows. Market experts noted that strong US GDP growth and higher profitability of American companies could prompt further FII reallocations away from emerging markets like India.

Rising Crude Oil Prices:
Crude oil prices edged higher in global markets after geopolitical developments, including increased US pressure on Venezuelan oil shipments and security operations in parts of Africa. Brent crude traded above USD 62 per barrel, adding inflationary concerns for import-dependent economies like India.

Profit Booking at Record Levels:
With indices hovering near record highs, investors booked profits across key sectors. Heavyweights such as Shriram Finance and Sun Pharmaceutical Industries were among the top losers in the Nifty50 pack, falling up to 2 percent intraday.

Technical Outlook

From a technical perspective, analysts highlighted 26,100 as a crucial support level for the Nifty. A bearish candlestick formation suggests potential downside towards the 25,950–25,850 zone if selling pressure persists. However, a decisive move above 26,325 could revive bullish momentum and open the door for further upside.

Market participants are now expected to remain cautious in the final trading sessions of the year, with the absence of fresh global or domestic triggers likely leading to consolidation at current levels.