Hit by fears over the impact of the Ben Bernanke-led US Federal Reserve announcing a cut in its stimulus,the benchmark BSE Sensex dived over 151 points at the close today on selling in banking,capital goods and power shares.
The Federal Open Market Committee yesterday announced a plan to cut monthly bond purchases to USD 75 billion from next month compared to USD 85 billion now,a decision that is expected to cause some volatility in emerging market assets.
After opening with a 100-point rise on firm Asian cues,the Sensex hit day’s high of 21,017.45 but the gains proved to be short-lived as nervous investors resorted to selling. It fell by 151.24 points,or 0.73 per cent,to 20,708.62.
“Emerging market economies (EMEs) have been caught off guard on the timing of the Fed decision,as consensus seemed set on March 2014. Chances of a capital flight to the US and a strong USD are real,and EMEs could suffer as higher than expected equity and debt outflows can materialise than already priced in,” said Ashish Kumar,Economist,Elara Securities in a report.
Finance Minister P Chidambaram tried to calm the sentiments by assuring that the government could take more steps to deal with emerging situation.
“I think the consequence should not be large. Even if there are some consequences then I think we are better prepared,” he said in New Delhi.
In the currency markets,the rupee was trading lower at 62.18 versus dollar. The dollar climbed against most of its 16 major counterparts after the US Fed’s taper decision.
Yesterday,the Sensex had snapped a six-day falling streak to rise by 248 points after the RBI’s surprise decision to maintain a status quo on policy rates.
The NSE Nifty index declined by 50.50 points,or 0.81 per cent,to 6,166.65. after touching the day’s high of 6,263.75. Also,SX40 index,the flagship index of MCX-SX fell 63.06 points to end at 12,336.53.
Sectorally,the BSE Banking sector index suffered the most falling 2.43 per cent,followed by capital goods index (1.91 per cent),Oil and Gas index (1.23 per cent) and Power index (1.02 per cent).
* BSE index falls 0.73 pct; NSE ends 0.81 pct lower
* Interest-rate sensitive stocks reverse Wednesday’s gains
* India’s VIX near 7-month low after RBI,Fed’s moves
* Wockhardt surges on listing of unit in Europe
BSE Sensex falls as US Fed taper ignites foreign investor sales concern,ICICI Bank share price plunges
(Reuters) BSE Sensex slipped on Thursday,falling for a seventh session out of eight,as blue chips such as ICICI Bank declined after the U.S. Federal Reserve announced the start of its tapering,raising concerns about foreign selling.
The fall came even as global shares took the Fed’s decision to trim its bond buying by $10 billion to $75 billion a month largely in their stride while India’s finance minister said the country is better prepared to deal with U.S. tapering now.
Overseas investors are net buyers of more than $18 billion worth of shares so far this year,the biggest in emerging Asia,according to Deutsche Bank data earlier this month,which also makes the country vulnerable to potential selling.
Investors say the prospect of rate hikes from the Reserve Bank of India could also weigh on shares,despite the relief rally on Wednesday after the central bank surprised investors by keeping monetary policy on hold.
Indian shares have thus steadily retreated from record highs hit on Dec. 9,with the BSE index 3.7 percent away from an all-time high of 21,483.94.
“One of the big questions post Fed’s move is whether liquidity will continue flowing to emerging markets like India or not. If rates go up in U.S. then it will be risk for EMs,” said Aneesh Srivastava,chief investment officer at IDBI Federal Life Insurance.
The benchmark BSE index fell 0.73 percent,or 151.24 points,to end at 20,708.62,
The broader NSE Nifty index declined 0.81 percent,or 50.50 points,to end at 6,166.65,closing below the psychologically important 6,200 level.
However,NSE’s volatility index,or the domestic equivalent of the VIX fear gauge,marked its lowest level since May 7 intraday after the RBI and Fed’s moves pointing towards some bets on stability in the markets soon.
Among blue chips,rate sensitive stocks especially banks led the fall on possible risk aversion on U.S. Federal Reserve tapering and potential hike in interest rates in the near term if inflation fails to cool down.
In private banks,ICICI Bank Ltd fell 3 percent,HDFC Bank ended 2.1 percent lower,while Kotak Mahindra Bank lost 3.8 percent.
State owned banks which outperformed their private sector peers on Wednesday on expectations of bond portfolio gains after RBI kept interest rates unchanged also reversed gains. State Bank of India Ltd fell 1.8 percent while Punjab National Bank Ltd ended 1.7 percent lower.
Among non-banking lenders,Housing Development Finance Corp Ltd (HDFC Ltd) ended down 2.8 percent,while IDFC Ltd fell 2.2 percent.
In auto stocks,Hero MotoCorp Ltd fell 1.9 percent while Mahindra and Mahindra Ltd lost 1 percent.
Power Grid Corp of India Ltd closed 0.8 percent lower as the 700 billion rupees ($1.2 billion) of shares it recently sold became eligible to trade on Thursday,marking its second highest volume on NSE in a day since its listing in Oct 2007.
However among stocks that gained,software service exporters rose as a strengthening dollar on the back of the Fed taper could weaken the rupee,improving margins from overseas.
Tata Consultancy Services Ltd gained 1.3 percent,while Infosys Ltd rose 1.6 percent after earlier touching a record high of 3,544.95 rupees.
Wockhardt Ltd surged 10.1 percent,marking its third consecutive day of gains,on listing plans of unit Wockhardt Bio AG on the Berne Stock Exchange in Switzerland.
FACTORS TO WATCH
* Dollar pares gains after Fed sweetens taper message
* Brent slips towards $109 as dollar rises on Fed tapering
* European shares rally as Fed sugar-coats taper
* Foreign institutional investor flows