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US rate hike hint pulls Sensex, Nifty to 2-week lows

The benchmark S&P BSE Sensex snapped its three-day gaining string and dropped 93 points to close at 21,740.09 - the lowest close since 21,513.87 on March 6. HDFC and L&T led the 22 losers in the 30-share index. The wide-based 50-issue CNX Nifty of the NSE also dipped 40.95 points, or 0.63 per cent, to end below the 6,500-mark at 6,483.10. This is also its weakest since 6,401.15 on March 6.

Total market breadth was negative as 1,534 stocks ended lower, 1,269 finished higher and 137 closed flat. US stocks fell Wednesday night after Fed chair Janet Yellen said the time-frame for raising interest rates could be on the order of around 6 months after the stimulus ends.

The Fed also voted to cut its monthly bond purchases by USD 10 billion to USD 55 billion. Brokers said the signal in hike in interest rates by Fed might affect foreign fund inflows, which drove domestic indices to lifetime highs recently.

A perceived slowdown in the Chinese economy also aggravated the situation further as all Asian markets closed in the red. Selling was seen in most of the segments as 9 out of 11 sectoral S&P BSE indices closed with losses while only IT, Teck and Healthcare finished with gains. TCS, Infosys and Wipro led IT gains after recent losses.

Realty, capital goods, power, banking and metal counters were the worst hit. Cautiousness ahead of the RBI’s policy meeting next month affected interest-rate sensitive scrips.

Rupee logs worst loss in 2 months

The rupee on Thursday depreciated 39 paise, logging its biggest daily loss in nearly two months, to end at 61.34 versus the dollar on fears of capital outflows from emerging markets after Federal Reserve chief signalled a sooner than expected hike in US benchmark interest rates. The dollar traded strong against its major global peers with the dollar index up 0.32 per cent.

Higher interest rates in the US may reduce the attractiveness of emerging market assets leading to outflows, said experts, adding that a US rate hike in mid-2015 is 6-7 months earlier than what markets had expected. Fresh dollar demand from importers and some banks as well as weak local scrips also weighed on rupee Thursday.

At the Interbank Foreign Exchange (Forex) market, the domestic unit resumed lower at 61.36 a dollar from previous close of 60.95. It tried to recover in afternoon deals to a high of 61.0650 on sustained dollar selling by exporters and some recovery in stocks. However, it fell back to a low of 61.40 before concluding at 61.34 — a fall of 39 paise or 0.64 per cent. Previously, it had plunged 44 paise or 0.70 per cent on January 27.
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