Stocks bleed ahead of key Fed meeting
Benchmark indices fell over 1% to their lowest in five weeks
Investors took money off the markets ahead of the fiscal year-end as key US rate decisions loomed, while experts cautioned about further losses after a year of sterling gains. The benchmark Sensex and Nifty indices fell over 1% to their lowest in five weeks, bringing losses over the past one week to more than 2%. While the BSE Sensex fell 1% to 72,012.05 points, the NSE Nifty closed 1.1% lower at 21,817.45. The broader markets suffered, too, with both Nifty Smallcap 250 and Nifty Midcap 100 settling 1.2% lower.
With the Nifty falling below the crucial support level of 21,900, market experts said it may slip another 200-300 points.
“So far as Nifty goes, we expect 21,800 to act as a support, which, if broken decisively, could result in the bellwether testing 21,100,” said Gaurav Dua, head, capital market strategy at Sharekhan by BNP Paribas. He explained that the markets had run up phenomenally, especially the mid- and small-cap segments, “where speculative froth had arisen and this is being corrected, which is healthy”.
The Nifty IT index slipped 2.9%, dragged down by Tata Consultancy Services Ltd (TCS) which fell 4.37%. Among index heavyweights, Infosys Ltd, Reliance Industries Ltd (RIL), Larsen and Toubro Ltd (L&T) and ITC Ltd led the losses.
“Following Bank of Japan’s decision to hike interest rates for the first time in 17 years, Asian peers’ mood turned sour, which pulled the Indian market to continue its recent pessimism,” Vinod Nair, head of research, Geojit Financial Services said.
The Nifty has gained 28% in the past year while the Sensex is up 24%. Market participants believe a further correction cannot be ruled out,
given prevailing worries about a potential bubble burst.
Last week, Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch spoke of “pockets of froth” in the market, pointing to the need for caution.
“Some people call it a bubble, some may call it froth. The question is, it may not be appropriate to allow that bubble or froth to keep building. Because if it keeps building, it will burst, because by definition, bubbles burst,” Buch said.
Meanwhile, investors are keeping a close watch on the
US Federal Reserve, whose rate-settingcommitteeismeeting over two days. Markets will parse every word of Federal Reserve chair Jerome Powell to figure out the interest rate cuts, which are expected to begin later this year. Markets expect three rate cuts already, but with the Bank of Japan raising interest rates for the first time in 17 years, the Fed commentary on Wednesday will be keenly awaited. The Federal Open Market Committee (FOMC) will announce its decision on Wednesday.
“The Fed will push back against market expectations of June rate cuts and speak of the inflation fight still being work in progress,” said Ajay Bagga, a market expert. Presidential elections are normally positive for the US markets, and that should help in providing a positive global backdrop this year, he added. “Fears of lower quantum and a reduction in the number of Fed rate cuts in 2024 on the back of recent US data have weighed on sentiment,” Saurabh Jain, assistant vice president of research at SMC Global, told Reuters. Hawkish commentary from the Fed on Wednesday could hurt foreign inflows, Jain added.
All said, India continues to remain in a sweet spot, given its strong growth prospects.
Investors could use steep corrections as buying opportunities, a UBS Global Wealth Management note dated 7 March said.