US Fed rate hike jitters hit home, Sensex takes a 443point blow

MUMBAI:Tracking a global sell-off, domestic equities fell nearly 2% on Monday, posting their biggest single-day decline since the Brexit vote, on renewed talks that the US Federal Reserve might raise interest rates as early as next week.

The Sensex ended at 28,353.54, showing a fall of 443.71 points, or 1.54%. The index had dropped 604.51 points on June 24 after Britain voted to exit the European Union. The NSE Nifty fell 151.10 points, or 1.70% to 8,715.60, also the biggest since June 24.

Apprehension of further tightening of norms for foreign investors and high valuations for Indian stocks also hit sentiment.

The BSE mid-cap index fell 2.95% — the biggest in six months — and small-cap declined 2.35%.

Tracking weak equities, the rupee also lost 25 paise to end at 66.92 against the US dollar.

“There are Fed presidents who are airing the view (of a rate hike) in consonance with the chair Janet Yellen,” said Dhananjay Sinha, research head, Emkay Global. “This moves the opinion closer to a September hike.”

Tata Steel was the biggest loser among Sensex stocks ( down 5.30%), followed by Adani Ports (down 4.37%) and SBI (down 4.28%). Among banks, SBI fell 2.6%, PNB declined 2.6% and ICICI Bank dropped 3.3%.

A European brokerage head said there is already the view that Indian stocks have run up in valuations in the past three months. “So a 3% to 5% correction is further expected and all the factors are adding up to that view.”

Asian shares suffered their sharpest setback since June with MSCI’s broadest index of AsiaPacific shares outside Japan falling 2.2%, pulling away from a 13-month peak hit last week.

Indian markets will be closed on Tuesday for Id-Ul-Zuha.