BUSINESS

Nifty below 11,000 first time since Mar.

Fed factor:Markets were expecting a more dovish stanceby the U.S. central bank.PAUL NORONHA

Fed factor:Markets were expecting a more dovish stanceby the U.S. central bank.PAUL NORONHA  

A day after the U.S. Federal Reserve reduced interest rate for the first time since 2008, global equity markets, including India, lost heavy ground as the U.S. central bank did not take a dovish stance as was widely expected by markets across the globe.

The Indian benchmarks lost more than 1% on Wednesday, with the 50-share Nifty falling below the psychological 11,000-mark for the first time since March.

While investors sold shares across sectors, the maximum losses were in auto, banking, metal and technology stocks.

The 30-share Sensex, which fell 787 points during intra-day trades to touch a low of 36,694.18, managed to recoup some of the losses to close at 37,018.32, down 462.80 points, or 1.23%.

As many as 23 of the Sensex constituents ended in the red with Infosys, HDFC Bank, HDFC, State Bank of India, ICICI Bank, TCS and Bajaj Auto contributing the maximum to the day’s losses.

The broader Nifty closed at 10,980, shedding 105.40 points, or 1.24%. This was the lowest close for the index since March 1. Meanwhile, the India VIX index shot up 7% on Wednesday, pegging its total surge to nearly 20% in the last three trading sessions.

Vivek Ranjan Misra, Head — Fundamental Research, Karvy Stock Broking, attributed the fall to the ‘mid-cycle adjustment’ by the U.S. Federal Reserve as markets were expecting a more dovish stance by the U.S. central bank.

“For Indian equities, this is on top of the headwinds it has faced recently, like FII selling on account of tax proposals. There are other reasons as well, firstly the weakness in economy has not abated, as evident by the core sector data and auto sales. Secondly while some companies have reported good numbers, the vast number have been disappointing and commentary has not been encouraging,” Mr. Misra said. While the U.S. Fed announced a 25 basis points cut in interest rate, it also hinted that it was not the first of more cuts to come.

The statement led to equity markets tumbling globally with the benchmarks of Hong Kong, South Korea, Indonesia and Taiwan all ending in the red. Some of the European markets were also in the red on Wednesday.

Back in India, nearly 1,700 stocks lost ground on BSE, as against 778 gainers. Foreign investors were net sellers at more than Rs. 1,000 crore on Wednesday, having sold shares worth nearly Rs. 12,500 crore in July.

The weakness in equity markets spilled over to the currency markets with rupee weakening 27 paisa against the dollar.

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