Markets go into tailspin after Fed rate hike; Sensex tumbles 1,046 points

FPJ Web DeskUpdated: Thursday, June 16, 2022, 04:31 PM IST
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Kunal Patil

Equity indices faced heavy drubbing on Thursday after an initial rally, with the Sensex tanking 1,045.60 points amid a largely bearish trend overseas after the US Federal Reserve hiked rates by 75 basis points.

Across-the-board selling played havoc on the headline indices, with index majors Reliance Industries and HDFC twins contributing most to the decline.

Despite a smart rally in morning trade, the BSE benchmark failed to hold on to the gains and plummeted 1,045.60 points or 1.99 per cent to settle at 51,495.79 -- its fifth day of decline.

During the day, it tumbled 1,115.91 points or 2.12 per cent to its one-year low of 51,425.48.

On similar lines, the NSE Nifty plunged 331.55 points or 2.11 per cent to close at 15,360.60.

From the Sensex pack, Tata Steel, Tech Mahindra, IndusInd Bank, Wipro, Bharti Airtel, Bajaj Finance, Kotak Mahindra Bank and NTPC were the biggest laggards.

Nestle India was the only gainer.

Elsewhere in Asia, markets in Shanghai and Hong Kong settled lower, while Tokyo and Seoul ended marginally higher.

Markets in Europe were trading sharply lower in mid-session deals.

Stock exchanges in the US ended with sharp gains in the overnight session on Wednesday despite the rate hike by Fed.

"The early gains led by an in-line Fed policy was dampened as recessionary fears haunted global sentiments," said Vinod Nair, Head of Research at Geojit Financial Services.

Meanwhile, international oil benchmark Brent crude dipped 0.66 per cent to USD 117.68 per barrel.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd. said, “Markets witnessed frenzied selling in the closing stages of the trading session, after a sharp slump in key European indices prompted investors to unwind their position further. Rising interest rates to curb inflation menace and falling crude oil prices is creating fear amongst investors that the world could be heading towards a major economic slowdown as demand falters. Technically, the Nifty finally dismissed the key support of 15650 which it held since March. It was a decisive dismissal, that too on the day of the big event, thus inviting a pattern of further weakness in the medium term. With the Nifty closing below 15400, the current bearish sentiment may see the index slide further to 15100 or 15000 in the near term. On the other hand, the previous support of 15650-15730 levels has now become resistance to the market. The strategy should be to short trade if Nifty bounces to given levels and place a stop loss at 15800 or buy Nifty if it drops to 15100-15000 with a stop loss at 14950.”

Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 3,531.15 crore on Wednesday, as per exchange data.

Vinod Nair, Head of Research at Geojit Financial Services said,"Market is catching up to the reality that tight monetary policy is the lone card on the table lingering on high inflation. As a result, the global economy is bound to slow down further impacting corporate earnings, as indicated by MoM fall in US retail sales. Valuations continue to trade on the marginally upper side of long-term averages and FIIs continue the selling mode. The stocks trading at high valuations & sectors like IT & Metals are the most impacted firms. In such a situation, preservation of capital is the theme by investing in a balanced portfolio of equity, debt & cash. In equities, safe sectors will be those that are least impacted by inflation & aggressive policy like Finance & Services. Defensives like Consumption, IT, Pharma & Telecom can also be considered on a long-term basis"

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