Domestic markets on Thursday ended lower as negative sentiment persisted across the globe after the Bank of Japan and the US Federal Reserve acknowledged concerns over Britain’s likely exit from the European Union while keeping key policy rates steady.
Tracking a global sell-off, the benchmark Sensex fell 200.88 points to end at 26,525.46 and the NSE Nifty cracked below the 8,200-mark by falling 65.85 points to 8,140.75.
The rupee also slipped by 6 paise to end at 67.21 a dollar on fag-end demand for the American unit from banks and importers amid fall in domestic stocks.
Vinod Nair, head of Research, Geojit BNP Paribas Financial, said, “The US Fed and the Bank of Japan took status quo on their policy meets amid worries over Brexit, which dragged down global and domestic equities. Additionally, the two probable Fed rate hikes in 2016 remain tentative which spooked investors. The anxiety over Brexit is creating volatility in the equity and continues to make gold dearer.”
Shreyash Devalkar, Fund Manager, BNP Paribas Mutual Fund, said, “Markets traded the day in the negative zone as the US Fed decision to keep interest rates unchanged and the chairwoman’s commentary on US economic outlook weighed in on investor sentiment. The US Fed signalled that it is likely to adopt an even slower approach to raising interest rates in the US due to weaker job creation at home and fresh worries about economic events abroad.” The Fed trimmed its GDP estimate for the US to 2 per cent from 2.2 per cent for 2016.
According to Abheek Barua, chief economist, HDFC Bank, the US Fed maintaining status quo was in line with expectations especially considering the disappointing payroll reading in May. However, the main focus was on the post policy statement and forecasts. In this regard, the changes that were made to forecasts — downward shift in rate projections and increases in inflation forecasts — do suggest that the Fed has made a slight change to its reaction function and implies a very gradual monetary tightening cycle over the medium to long-term, Barua said.