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Weak sentiments across global markets pushed domestic markets lower in Thursday’s trade after the US Federal Reserve (US Fed) hinted interest rates to peak above 5 per cent by the end of 2023. Moreover, the central bank raised interest rates by 50 basis points (bps) in its December meeting to 4.25-4.5 per cent, the highest since 2007.
Further, later today, the European Central Bank and Bank of England are due to announce their interest rate decisions.
Frontline S&P BSE Sensex tanked over 750 points to hit day’s low of 61,911 levels, whereas Nifty50 slumped over 200 points to hit low of 18,439. Volatility gauge, India VIX, meanwhile, climbed over 6 per cent.
All sectors, too, drowned in the sea of red with the IT, Media, and Metal indices being the worst hit, declining over 1 per cent each.
However, analysts believe that the domestic market’s earning prospects and growth will help recoup losses going forward.
“The Indian market, though not completely decoupled from the mother market US, has been charting a slightly different path exhibiting surprising resilience even in the face of global weakness. This is due to India’s superior growth and earnings prospects, going forward. However, high valuations and rising interest rates are likely to restrain the ongoing rally,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Meanwhile, here are the top factors behind Thursday’s market fall:
Hawkish US Fed commentary: Not only did the US Fed hike interest rates by 50 bps to 4.25-4.5 per cent in the December meeting, it also projected additional 0.75 increases by the end of 2023 until inflation is controlled. Following the statement, the US equities turned negative on Wednesday, with Dow Jones, NASDAQ Composite, and the S&P 500 slipping up to 0.7 per cent.
The weak global sentiments also dampened markets in Asia-Pacific and Europe. Key indices Stoxx 600, Nikkei 225, Kospi, Kosdaq, the S&P 200, and Hang Seng indices dropped up to 2 per cent in trade.
Index-heavyweights subdued: The benchmark indices fell over 1 per cent in the intra-day trade driven by weakness across heavyweights like Tech Mahindra, Infosys, Tata Consultancy Services, ITC, SBI, Reliance Industries, Titan, among many others.
Weak foreign flows: So far in the month of December, foreign institutional investors (FIIs) have sold nearly Rs 5,000 crore worth of equities. However, in the past two days, FIIs have turned net buyers of Indian equities and pumped over Rs 900 crore in India. On the flipside, the domestic institutional investors (DIIs) have supported the domestic markets by purchasing Rs 8,748 crore worth of equities so far this month.
Falling rupee: The Indian domestic currency depreciated 15 paise to 82.64 against the US dollar on Thursday’s early trade. The Indian currency opened sharply lower at 82.63 against the dollar, slipping further to 82.64. The dollar index, which gauges greenback against a basket of six currencies, meanwhile, appreciated 0.08 per cent to 103.85.
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