Equity markets opened with deep cuts on Thursday, hours after Federal Reserve Chair Jerome Powell said the US central bank was ready to hike interest rates in March and balance sheet trimming would start soon after. However, no specific timeline has been set for the contraction of its balance sheet.
The hawkish commentary dragged the BSE Sensex down by 1,419 points or 2.4% during the day’s trade, but the benchmark ended the day 581 points down, thanks to buying in auto and banking stocks. Nifty closed 1%, lower but above the psychologically important level of crucial 17,000 at 17,110. The broader markets, too, ended the day in the red. Additionally, the monthly expiry of the F&O contracts led to volatility in the markets.
Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services, said, “Global markets plunged as short-term US yields hit 23-month highs and the dollar strengthened after the Federal Reserve’s chairman maintained its hawkish policy. The market feared that the central bank could be more aggressive in its monetary policy to curb inflation.”
With the Fed outcome behind the market, the focus will now shift to domestic triggers like the Union Budget, economic and core sector growth data.
As the dollar strengthens and the rate cycle turns in the US, money will move to safer dollar denominated assets as investors take risk off the table. Shares of new-age tech companies continued to slide further, mirroring the sentiment in the global tech stocks. Shares of Zomato dipped another 10% on Thursday, closing at `90.50 on the BSE, while others like Nykaa, Paytm, and Policybazaar also ended the day with cuts.
The Sensex saw 21 out of 30 constituents ending in the red. Similarly, the Nifty-50 ended lower by 167.80 points or 0.97% at 17,110.95. Shares of HCL Tech dipped 4.17% on Thursday, being the top loser in the Sensex pack. Tech Mahindra, Dr. Reddys Labs, TCS, and Wipro were other laggards in the index. On the other hand, Axis Bank, SBI, Maruti Suzuki, and Kotak Mahindra Bank ended higher in an otherwise volatile session.
Barring banks and auto, all other sectors ended in the red. The Nifty IT index was the top sectoral loser, falling 3.5% and also to its lowest level since August 2021. The broader equity indices BSE Midcap and Smallcap also plunged above 1% each. Overall, the market breadth remained negative as nearly 1,886 shares declined, and 1,478 advanced on the BSE on Thursday.
“Stocks globally fell on Thursday after the Federal Reserve stuck to plans for an interest rate increase in March and more policy tightening to curb high inflation. In Asia, shares slumped to their lowest in nearly 15 months, while European stocks were in recovery mode post a weak opening. Cash volumes on a monthly expiry day touched an 8 expiry high suggesting heightened activity post the US Fed outcome and ahead of the Union Budget,” said Deepak Jasani, head of retail research, HDFC Securities.
Markets in Asia also reacted to the hawkish stance by the US Fed on Thursday. Japan’s Nikkei 225 fell more than 840 points or 3.1% to close at 26,170.30. China’s Shanghai Composite and Hong Kong’s Hang Seng also fell 1.7% and 1.9%, respectively.