Fed Shock: Equities fall as FIIs flight feared, banking stocks slide
Mumbai, June 17, 2021
Fears of foreign funds exiting India along with expectations of lower consumer sentiment due to Covid pulled India's stock markets lower on Thursday.
The fears were triggered by US Fed statement on the eventual restart of liquidity tapering programme.
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 an RBI report which said that Covid's second wave had a negative impact on bank deposits and currency holdings among the public, indicating 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.
Consequently, the BSE Sensex closed 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 50 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."