The BSE Sensex opened flat on Thursday but soon tanked as much as 180 points, Nifty slipped below the 10,100 mark and rupee hit a 10-week low as the US Federal Reserve left interest rates unchanged, but signalled it expects another interest rate hike by year-end.
The Fed has already raised rates twice this year.
The US central bank further said it would in October start reducing it's approximately $4.2 trillion holdings of US Treasury bonds and mortgage-backed securities, Business Standard reported.
The policy statement and accompanying projections showed the Fed is still in the middle of a balancing act between an economic recovery that has kept US unemployment low and is gaining steam globally and a recent worrying drop in US inflation.
Nifty has in last six-seven sessions managed to trade in the area of 10,131-10,115. Many market analysts believe the market is inflated as Indian equities have been rallying since that start of the calendar year even as economic growth in the June quarter slumped to a three-year low and lower-than-expected corporate earnings were reported in the first and second quarters of the 2018 fiscal.
The benchmark index of National Stock Exchange (NSE) – Nifty 50 — and BSE Sensex have so far this year returned 21-24 percent.
On the rupee front, the home currency opened at 64.50 a dollar and touched a low of 64.53 — a level last seen on July 12, Mint reported. The rupee has gained 6 percent so far this year.
The dollar index, which measures the US currency's strength against major currencies, was trading at 92.579, up 0.08 percent from its previous close of 92.51, the business daily reported.
Even though the Federal Reserve didn't change interest rates, the policy statement showed the it was balancing low US unemployment and a recent drop in US inflation.
"In view of realised and expected labour market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1.25 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labour market conditions and a sustained return to 2 percent inflation," the policy statement noted.
