US Fed rate hike fears spook bourses, Sensex plunges 604 pts

Hike in interest rates likely to impact flow of funds into emerging markets.

By: ENS Economic Bureau | New Delhi | Updated: March 10, 2015 1:24:27 am

Domestic markets, on Monday, buckled under fears of an earlier-than-expected rate hike by the US Federal Reserve following strong jobs data in the country, with the BSE Sensex plunging 604 points to end below the key 29,000 level.

While the 30-stock benchmark Sensex, which had hit the 30,000-mark intraday on Wednesday, dipped by 2.05 per cent on Monday to close at 28,844.8, the broader Nifty too fell by 181 points or 2.03 per cent and closed at 8,756.8.

The fall tracked losses in global markets as investors were concerned that a hike in interest rates in the US would impact the flow of funds in the emerging markets including India. “There are concerns on how the US rate hike will pan out and hence there is a concern in the global markets,” said Pankaj Pandey, head of research at ICICIdirect.com.

Dipen Shah, head of research, Kotak Securities, said, “There are fears of dip in liquidity flow into emerging markets after US increases rates.”

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Experts pointed that the markets were also watching domestic developments, mainly on important pending Bills in Parliament. “Markets are waiting for some clarity on the land acquisition bill,” said Pandey. On Monday, the banking index at BSE fell by 3 per cent followed by the power and the capital goods index that lost 2.9 per cent and 2.7 per cent, respectively, over previous day.

While Wall Street stocks plunged on Friday in the wake of the improved US jobs data, growth concerns in China and in Japan also impacted the Asian markets. Tokyo’s Nikkei closed 1 per cent lower. MSCI’s main Asia-Pacific index outside Japan fell 1.3 per cent.

hikeEuropean shares fell on Monday with investors booking lofty gains as the European Central Bank begins its programme of bond purchases, aimed at reviving inflation and economic growth.

The market has rallied strongly since the start of the year, with the FTSEurofirst 300 surging over 14 per cent in the run-up to the ECB’s quantitative easing programme, under which it will buy bonds worth $65 billion per month.

The FTSEurofirst 300 index of top European shares closed down 0.2 per cent at 1,567.09 points, slipping from a seven-year high hit last week.

Greek banking shares were among the biggest losers, with Eurobank down 11.3 percent lower.

Re hits 2-month low, tanks 39p

Mumbai: The Indian rupee on Monday plunged by 39 paise to a two-month low of 62.55 against the US dollar after better-than-expected jobs data triggered expectations of an early hike in US interest rates and capital outflows.

Even as the stocks tanked across the board, the rupee fell to a two-month low of 62.7350 — a level not seen since January 8, 2015, when it touched an intra-day low of 63.20 — but recovered some ground to touch a high of 62.53 before concluding at 62.55, still showing a fall of 39 paise or 0.63 per cent.

The next US Federal Open Market Committee meeting on March 17-18 is likely to end with an rate decision. If the Fed drops “patience”, the reality of a rate rise at the June or July meeting will be inescapable. ENS

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