MARKETS EXTEND LOSSES ON US FED RATE HIKE
Stocks spiralled lower for a second straight session on Thursday after the US Fed hiked interest rates and struck a hawkish stance amid rising crude oil prices. The BSE Sensex tumbled 218.10 points to 36,324.17, while the NSE Nifty dropped 76.25 points to finish below the 11,000-mark. Moreover, September futures and options (F&O) expiry added to market volatility as investors offloaded their long bets instead of carrying them forward to the next series for October, brokers said. Participants remained cautious after the government increased import duties on select goods to stem the rupee's fall and the RBI announced measures to ease liquidity concerns.
The benchmark indices fell on Thursday as concerns over the effects of a weaker local currency and crude oil prices on the economy outweighed steps by the government and the central bank to restore investor confidence.
Most global markets, too, were down as investors digested the likelihood of more Federal Reserve interest-rate increases stretching into next year.
The Sensex declined 0.6 per cent to 36,324.17, after falling as much as 0.8 per cent. The benchmark is now headed for its worst month in two and a half years, and volatility is back to levels seen in February. The index is down 5.9 per cent in September.
The Nifty declined 0.7 per cent to close at 10,977. The index has ended with losses in seven of eight past trading sessions. From its peak touched a month ago, the 50share blue chip index is down 6.5 per cent.
India has lost its top spot as Asia’s best-performing stock market this year to New Zealand after a selloff in nonbank financial firms spooked investors already concerned about the impact of higher oil prices and the rupee slump.
“The 25-basis point rate hike by Fed was in line with expectations. The outflow of foreign funds and higher oil prices are weighing on the sentiment. Raising of import duty for essential goods, liquidity constraints with NBFCs, and the derivatives expiry added volatility to the market. This pressure is likely
to continue till the financial market stabilises and confidence returns with accommodative valuation,” said Vinod Nair, head of research, Geojit Financial Services.
Private sector lenders were among the major losers on Thursday’s trade. YES Bank slumped 9 per cent, Axis Bank fell 2.8 per cent, while Kotak Mahindra and ICICI Bank declined nearly 2 per cent.
Seventeen of 19 sector sub-indexes compiled by BSE declined, led by a gauge of real estate and capital goods companies.
Experts said that the US Fed’s statement handed ammunition to hawks and doves alike as investors parsed the language for clues on monetary policy.
“The market forecast a 99 per cent probability of a 25 basis points hike and there has, therefore, not been a significant reaction to the Fed announcement. Investors must be mindful that at some point, the Fed will inevitably become more ambiguous in its forward guidance, making, in our view, the trajectory for US rates progressively more difficult to read,” said Larry Hatheway, chief economist at GAM Investments.