After a brief surge earlier in the week, the Indian stock market saw a significant decline on Thursday, with both the Sensex and Nifty shedding over 1%. The drop came amid growing caution among investors, driven by several global and domestic factors.

Trump’s Victory Fails to Sustain Momentum

The domestic equity market had initially gained on Wednesday, buoyed by the surprise victory of Donald Trump in the recent US presidential election. His win initially sparked optimism, with hopes that his administration would bring favorable economic policies. However, the momentum was short-lived, and Thursday’s trading session saw a sharp pullback.

Market Fears Ahead of Key Policy Announcements

A primary concern for investors is the uncertainty surrounding the US Federal Reserve's policy decision, which is expected later today. The market is on edge, speculating that the Fed may raise interest rates to combat inflationary pressures. The potential tightening of monetary policy in the US has added to the apprehension, prompting investors to scale back their positions in anticipation of volatility.

Global Tensions: Bank of Japan’s Expected Rate Hike

Adding further pressure to the global markets, the Bank of Japan is expected to announce a rate hike soon, which has unsettled investors already dealing with the aftershocks of rising global interest rates. This potential policy shift in Japan is seen as a sign that even traditionally dovish central banks are preparing to tighten policies in the face of rising inflation, compounding fears of a global slowdown.

Investor Caution and Market Sentiment

With these global developments, investor sentiment has taken a hit. There is increasing caution as the market braces for potential shifts in global monetary policies, which could have far-reaching implications for the Indian market. The sharp drop in the Sensex and Nifty reflects the fragility of market confidence in the current global economic climate.