The equity indices slumped on Friday with the BSE Sensex losing over 650 points caused by across-the-board selloff led by metal, oil and gas and financial stocks.
Around 11.05 a.m., Sensex was trading at 51,668.59, lower by 654.74 points or 1.25 per cent from its previous close of 52,323.33. It opened at 52,568.07 and has touched an intra-day high of 52,586.41 and a low of 51,647.90 points.
The Nifty50 on the National Stock Exchange was trading at 15,470.45, lower by 220.95 points or 1.41 per cent from its previous close. The setback was linked to the possible withdrawal of funds by FPIs in the market owing to the US Fed statement on the eventual restart of liquidity tapering programme.
Fed shock
Fears of foreign funds exiting India along with expectations of lower consumer sentiment due to Covid pulled India's stock markets lower on Thursday and continued on Friday over the US Fed move.
The US Federal Reserve has projected at least two interest rate hikes in 2023, a year earlier than forecast in the March meeting. The development assumes significance as it can lead foreign capital away from EMs such as India.
On Thursday, the Fed's statement sent shock waves in the Asian as well as domestic markets. However, domestic indices pared some of their initial losses.
Besides US Fed projections, sentiments remained subdued on account of a RBI report which cited that Covid's second wave had a negative impact on bank deposits and currency holdings among the public, indicating to a large outflow of funds for pandemic-related medical expenses.
Among sectors, Realty, Power, Metals, Auto, Banks were the loss leaders while IT and FMCG were the only two sectors ending in the positive zone.
Fed Policy Impact
Consequently, Sensex closed on Thursday at 52,323.33, lower by 178.65 points or 0.34 per cent from its previous close of 52,501.98 points. The Nifty on the National Stock Exchange ended at 15,691.40, lower by 76.15 points or 0.48 per cent from its previous close.
"India's benchmark equity indices ended lower for the second consecutive day on June 17 following weak global cues caused by the US Fed which signalled higher rates in 2023 in its policy outcome on Wednesday," said Deepak Jasani - Head of Retail Research at HDFC Securities.
According to Siddhartha Khemka, Head - Retail Research, Broking & Distribution, Motilal Oswal Financial Services: "Domestically, weak global cues along with weekly F&O expiry led to a volatile session. Metals continued to witness selling pressure after China announced intentions to release industrial metals from its national reserves to restrain commodity prices."
"On the other hand, IT stocks were among the gainers as dollar strengthened against the rupee to its highest level in six weeks."
