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Mkt indices drift lower as US Fed turns hawkish
Selling in banking stocks erodes early gains
Sensex, Nifty tumble after Federal Reserve acted in total contrary to market expectation of softer approach amid easing inflation pressure
Mumbai: BSE Sensex plummeted 879 points, while NSE Nifty crashed below the 18,415 mark on Thursday, in tandem with a global sell-off after the US Federal Reserve increased the interest rate and signalled more hikes in its fight against inflation. A depreciating rupee added to the gloom, traders said. Reversing its two-day winning run, the 30-share BSE Sensex tanked 878.88 points or 1.40 per cent to finish at 61,799.03. The broader NSE Nifty plummeted 245.40 points or 1.32 per cent to end at 18,414.90.
"The Fed has startled the market by maintaining its hawkish tone, as investors were expecting a softer approach after the release of better-than-expected inflation numbers. IT stocks led to pessimism in the domestic market as recession fears grew in the global economies following the Fed's comments. The market now awaits the BoE (Bank of England) and ECB (European Central Bank) decisions, which are likely to follow a half-point hike," said Vinod Nair, head (research) at Geojit Financial Services.
"The US Fed effect led to a massive sell-off in the markets as banking, IT, metal and realty stocks received severe pounding at the hands of investors. Markets were disappointed after the Fed indicated that the rate hike regime would continue next year, which further accentuated the already fragile market sentiment prompting investors to trim their equity exposure," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.
Foreign institutional investors (FIIs) were net buyers on Wednesday as they bought shares worth Rs 372.16 crore, according to exchange data.
In the broader market, the BSE midcap gauge declined 1.05 per cent and smallcap index fell by 0.61 per cent. Among sectors, IT tumbled 2.06 per cent, followed by teck (1.92 per cent), metal (1.82 per cent), consumer durables (1.37 per cent), services (1.28 per cent), relaty (1.25 per cent), financial services (1.19 per cent), bankex (1.18 per cent) and commodities (1.17 per cent).
Tech Mahindra was the biggest laggard among Sensex components, tumbling 3.98 per cent, followed by Infosys, Titan, HDFC, ITC, HDFC Bank, Tata Steel and TCS. Only Sun Pharma and NTPC managed to close in the green, rising up to 0.08 per cent. The US Fed on Wednesday increased interest rates by 50 basis points on expected lines and signalled more hikes ahead to fight inflation even as the world's largest economy stares at a possible recession. The US central bank raised the interest rate to 4.25-4.50 per cent to the highest level in 15 years.
Elsewhere in Asia, equity markets in Seoul, Tokyo, Shanghai and Hong Kong ended lower. Equity exchanges in Europe were trading in the red in mid-session deals. The US markets had ended in the negative territory on Wednesday.
Oil & gas ended higher. International oil benchmark Brent crude declined 0.77 per cent to USD 82.06 per barrel. The rupee declined by 27 paise to close at 82.76 (provisional) against the US dollar.
