US inflation bleeds markets

„Sensex sheds 1457 points as FPIs step up selling

Domestic equities witnessed a steep fall on account of weak global cues after US inflation hit a 40-year high of 8.6 per cent and investors getting jittery over India's inflation data which was scheduled to release post-market hours. Global markets are now factoring in 75 basis points interest rate hike instead of 50 bps earlier by the US Federal Reserve on Wednesday night as the US Fed meets on June 14-15.

Further, the rupee hit a record low against the US dollar amid volatile crude oil prices.

The Sensex hit an 11month low as the benchmark index closed 1456.74 points, or 2.68 per cent, down at 52846 after falling 1776 points intraday.

The Nifty-50 breached the 16000 levels to close at 15774 with a loss of 427 points or 2.7 per cent.

The Broader market mirrored the benchmarks, with the BSE Mid-cap Index down 2.73 per cent and BSE Small-cap down by 3.15 per cent. Even the volatility index, NSE's India VIX jumped 14.25 per cent to 22.37 levels.

The fall in the market shaved off over Rs 6.64 lakh crore of notional wealth as BSE's market cap fell to over Rs 245.19 lakh crore from over Rs 251.84 lakh crore.

Foreign portfolio investors were net sellers of equities worth Rs 4,164.01 crore, which has put pressure on the market and the domestic institutions intervention with Rs 2,814.50 crore purchase was not sufficient.

In Monday's fall IT, Bank

and Metal sectors suffered maximum damages.

"The correction in the global markets is due to a double whammy of upcoming policy rate hikes and cuts to the central

bank's balance sheet. Higher-than-expected US inflation data added fuel to the already wrecked market which was factoring in a 50 bps hike in the Fed rate. The weakened rupee,

persistent FII selling along with the anticipation of elevated domestic CPI numbers gripped domestic markets in fear," said Vinod Nair of Geojit Financial Services.