This was the second time Fed governor Ben Bernanke had cut back on the stimulus, a move that is likely to lead to an exodus of foreign investment from emerging markets, such as India, as investors switch to risk-off mode.
India's benchmark indices followed global cues and fell to their lowest levels since November 27 on Thursday. The BSE Sensex ended the day down 0.72%, or 149.05 points, to 20,498 points, while the National Stock Exchanges broader 50-share Nifty slid 0.76%, or 46.5 points, to 6,073. The reaction was a bit on the extreme side as the tapering was not altogether a surprise, said UR Bhat, managing director, Dalton Capital Advisors (India).
The fall would have been much steeper had it not been for the short covering seen in the last hour of trade, a day of expiry of derivatives contracts. Altogether, the Sensex has shed 875 points, or 4.09%, in the last five sessions, after surging to a lifetime high of 21,373.66 last Thursday.
FIIs sold shares worth $68.7 million on Thursday, paring their net purchases to $41 million YTD. In the last five sessions, FIIs have offloaded shares worth $478 million, which includes sales of $212 million on Monday, the highest single-day selling since August 20, 2013. Top losers on Thursday included SBI (-3.5%), Hero MotorCorp (-3.43%), Sesa Sterlite (-3.3%), Hindalco (-3.35%) and Tata Steel (-3.2%). The top gainers were Tata Motors (2.6%) and Bharti Airtel (2.24%).
Elsewhere, key Asian markets ended in the red. Straits Times, Shanghai Composite and Hang Seng lost between 0.48% and 0.79%, while Japan's Nikkei 225 declined the most by 2.45%. The major European indices also opened weak, with the FTSE 100, DAX and the CAC, trading down anywhere between 0.25% and 0.28% at about 5.00 pm IST.
Back home, most of the 13 BSE sectoral indices ended in the red. The BSE Bankex (2.67%) and BSE Realty (2.6%) were the top losers of the day. The BSE Bankex has fallen 1,178 points or 9.2% in the last five sessions.
The market breadth was weak with 1,750, or 64%, of the stocks declining compared with 836 stocks that ended higher.