Fed’s policy-tightening move triggers selling across the board
Stock indices, on Thursday, witnessed their biggest single-day fall in seven months on global cues, which prompted investors to sell their positions prior to the Union Budget.
The BSE S&P Sensex suffered its biggest single-day fall since May 2012 by plunging over 317 points to 19325.36, year’s lowest level, on all round selling, amid weak global cues triggered by concerns that the U.S. Federal Reserve’s policy-tightening moves could hit liquidity.
The NSE Nifty also fell below 5900-level to close at two-month low of 5852.25, down 90.80 points or 1.53 per cent.
Dow Jones, Nasdaq indices drop
The U.S. Dow Jones index closed 0.8 per cent down on Wednesday while losses at Nasdaq were sharper at 1.55 per cent.
Indices in Hong Kong, Singapore, South Korea, Japan, China and Taiwan were down by 0.47-2.97 per cent. European markets were trading lower by 1.5 per cent in early trade.
“U.S. Federal minutes released on Wednesday talked about slowing down QE3, and this spooked the market globally and the repercussions of the same were felt in India as well,” said Sudip Bandyopadhyay, MD and CEO of Destimoney Securities.
Except consumer durables, all sectoral indices on the BSE ended in the red. Leading the fall, BSE metal lost 3.23 per cent, followed by banks 2.52 per cent, realty 2.33 per cent, capital goods 2.07 per cent, oil and gas 1.77 per cent and PSU 1.72 per cent.
“Indian markets were predominantly being driven by global liquidity and even a whiff of that liquidity coming down scares Indian market,” Mr. Bandyopadhyay added.
Among the broad-based indices, BSE mid-cap stocks lost 1.64 per cent and small-cap stocks 1.74 per cent. The BSE 100 was down 1.71 per cent, BSE 200 1.70 per cent and BSE 500 was down by 1.68 per cent.
“The markets turned distinctively weak today [Thursday], and closed at the lowest levels in 2013. We believe this was largely due to the weakness in global markets”, said Dipen Shah, Head of Private Client Group Research, Kotak Securities.
The minutes of the last Fed meeting have raised concerns that the Fed may withdraw the monetary stimulus if there is some improvement in the economic data.
“This has raised concerns about fund flows across asset classes, including emerging markets,” said Mr. Shah, adding, “Indian markets have received substantial FII money over the past few months and any reversal of the same may make markets vulnerable, if matching flows do not come from the domestic participants.”
Rupee tanks 40 paise
Hit by heavy dollar demand, rupee on Thursday tanked by 40 paise to end at 54.47, its weakest level in over a month, as the American currency spurted on speculation that the U.S. Fed might withdraw its monetary stimulus sooner-than-expected triggering a global sell-off across asset classes.
The rupee resumed lower at 54.37 a dollar against the last closing level of 54.07 at the inter-bank foreign exchange market.
Tracking weak global stock markets and rising dollar demand, the rupee further fell to 54.60.
The rupee had closed at 54.69 a dollar on January 16.
In terms of fall, today’s [Thursday’s] rupee losses are the biggest since the 57-paise drop on January 4 to end above the 55-mark.
The dollar gained after minutes of U.S. Federal Reserve’s last meeting that were disclosed on Wednesday showed many Fed officials were worried about the costs and risks associated with the $85 billion a month asset purchase programme.
Fed minutes released on Wednesday talked about slowing down QE3 NSE Nifty falls below 5900-level to close at two-month low
Fed minutes released on Wednesday talked about slowing down QE3
NSE Nifty falls below 5900-level to close at two-month low