The Sensex on Thursday joined a global sell-off after the US Federal Reserve painted a gloomy picture for the US economy in the coming years and coronavirus infections rose in the US and other countries. The Sensex fell 709 points to 33,538.37 and the NSE Nifty Index declined 214 points to 9902.
The sentiment across the world took a beating after US Fed Chairman Jerome Powell said it may take several years for millions of jobs to return to people in the US economy. Unemployment has soared to record levels in the US in recent months, with 43 million people filing claims since the pandemic hit the country.
The Fed’s updated policy statement and projections indicated that it expects a 6.5 per cent contraction by the end of the year on a year-over-year basis, with the unemployment rate ending at 9.3 per cent, well above the Fed’s estimate of the long-run rate forecast of 4.1 per cent. The number of US coronavirus infections passed the two million mark and over 112,000 Americans have died, leading investors to worry about a second wave of the epidemic just as business activity is resuming.
Ajit Mishra, VP-research, Religare Broking, said, “Markets witnessed a sharp decline and shed over 2 per cent, tracking unsupportive global cues. The statement from the US Fed that recovery from pandemic would take longer than expected led to a weak start which worsened with a deep cut in the European indices in the latter half.” The Nifty index finally settled close to the 9,900 levels. All the sectoral indices ended with losses wherein telecom, banks and finance were the top losers.
Global slowdown worries markets
Stock markets are now worried about the gloomy forecasts made by the US Federal Reserve. The US is likely to witness a 6.5 per cent contraction by the end of the year with the unemployment rate set to rise further. The US slowdown is likely to affect capital inflows.
“The positioning of the global markets will continue to dictate the market trend ahead also. Nifty should hold 9850 for any rebound else profit taking would continue,” Mishra said. The Indian rupee fell 20 paise to a two-week low on Thursday to close at 75.79 against the US dollar.
According to Deepak Jasani, head-retail research, HDFC Securities, stock markets around the world retreated as fears over a second wave of coronavirus infections and a gloomy outlook from the US Fed distressed investors.
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