• The Indian stock market saw a 5% drop this week, triggered by the US Federal Reserve's cautious approach towards rate cuts.
• The Sensex lost over 1,000 points in three out of five trading sessions, eroding nearly Rs 17 lakh crore worth of market cap.
• The Nifty50 also declined significantly, breaching all essential support levels and indicating potential market volatility.
• Experts advise a balanced investment strategy and proper risk management in light of the recent downturn and global economic uncertainty.

The Indian stock market has experienced a significant downturn this week, with benchmark indices falling by 5 per cent. This decline was primarily triggered by the US Federal Reserve's cautious approach towards rate cuts in the coming year, leading to relentless selling by foreign institutional investors (FIIs). The Sensex, a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE), lost over 1,000 points in three out of five trading sessions this week. This resulted in a staggering erosion of nearly Rs 17 lakh crore worth of market cap from BSE-listed firms.

Market experts have described this week as a dreadful one for equity markets, with key indices falling dramatically and wiping out the gains of the previous four weeks. Osho Krishnan from Angel One noted, "The benchmark index experienced a significant decline, plummeting approximately 1,200 points from the previous week's closing figure. As a result, it finished the week below 200 simple moving average (SMA), marking a total loss of nearly 5 per cent."

Technical Analysis and Market Predictions

The Nifty50, a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange, also experienced a significant decline. It breached all essential support levels, leading the index to approach its most recent swing low, indicating potential volatility in the market. From a technical standpoint, as Nifty slipped below the pivotal zone of 200 SMA, the next potential support could be seen around the recent swing low around 23,200-23,100. A decisive breach is likely to open further downside towards 22,800 in the near period, according to Krishnan.

The weak global cues initiated the downward move, but the follow-up sell-off showcases the bears' eagerness to colour the market red ahead of Christmas. On Friday, Sensex settled at 78,041.59, down by 1,176.46 points or 1.49 per cent, and Nifty ended at 23,587.50, down by 364.20 points, or 1.52 per cent.

Sectoral Analysis and Investment Advice

On the sectoral front, selling was seen in Nifty's Auto, IT, Fin Services, Pharma, FMCG, Metal, Media, Energy, Private Bank, Infra, Commodities, and PSE sectors. Considering the recent developments, experts have advised approaching markets with proper risk management and refraining from taking complacent bets for the time being. Amid this cautious environment, Krishna Appala from Capitalmind Research maintains a bullish outlook on new-age, platform-based technology companies.

Experts suggest a balanced investment strategy that combines the stability and fair valuations of large caps with tactical exposure to profitable, domestic-focused tech companies. This approach offers a prudent way to capture growth potential while managing geopolitical and policy risks.