Market continues to fall; shed over two per cent in two days
Uncertain global cues and persistent selling by FIIs are expected to keep markets under pressure in the near term
NEW DELHI: The US Federal Reserve’s hawkish stance on future interest rate hikes, coupled with a strong dollar and rising oil prices, has spooked investors as the domestic equity benchmark indices plunged sharply by 2% in two sessions.
After falling by more than 1% each on Wednesday, Nifty 50 closed with a loss of 159 points, or 0.80%, on Wednesday at 19,742.35 while the Sensex ended at 66,230.24, down 571 points, or 0.85%. The market capitalisation of all the firms listed on the BSE fell by `2.6 lakh crore on Thursday to `317.9 lakh crore. The m-cap had fallen by `2.4 lakh crore on Wednesday.
The Fed in its policy meet on Wednesday kept the key interest rates unchanged but signalled that the high-interest rate regime would continue for a longer term and they might go for one more hike by the end of this year. This hawkish stance came despite the agency increasing interest rates from nearly zero to 5.25 to 5.5% over the last 18 months.
Following the meeting outcome, the US dollar and treasury yields rose. These factors put pressure on the stock market worldwide, especially in the emerging markets. “Bearish sentiment across the global equities led to selling in the domestic market for the third straight session as investors fretted over the US Fed statement indicating one more rate hike later this year. Other negative catalysts like lingering overseas fund outflows, rising US Dollar index and treasury yields, and higher crude oil prices are making investors jittery,” said Shrikant Chouhan, Head of Research (Retail), Kotak Securities Ltd.
Siddhartha Khemka, head of retail Research, at Motilal Oswal Financial Services, said the market fell by 2.2% in the last three days amid profit booking at higher levels and it would be better to prefer defensive sectors for some time until the market stabilizes. He added that uncertain global cues and persistent selling by FIIs are likely to keep markets under pressure in the near term.
FIIs have sold shares (net sales) worth `1,236 crore on Monday, `3,111 crore on Wednesday and `3,007 crore on Thursday. The rupee, despite the RBI’s intervention, settled flat at 83.10 a dollar on Thursday while Brent crude prices were trading at $92.5 level.
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