NEW DELHI: After a robust start to the week when the domestic equity market touched two new milestones, local shares declined sharply on Friday on concerns related to the Federal Reserve’s ability to undertake three rate cuts this year after the US reported higher-than-expected monthly inflation data.
The market turned cautious due to potential changes in the India-Mauritius tax treaty which could lead to increased scrutiny, a concern for foreign portfolio investors (FPIs). Mauritius, a tax haven nation, is a major spruce nation for FPI investment in the country. Further, a tepid start to the Q4 earning season and rising tensions between Iran and Israel forced investors to book profit.
India’s equity market benchmarks crashed over 1% each with the BSE Sensex closing the day at 74,244.90, down 793 points or 1.06%. Nifty50 ended the day at 22,519.40, lower by 234 points or 1.03%. In the broader market, BSE MidCap and SmallCap indices declined about 0.5% each.
Only five stocks in Nifty50 pack -- Divi’s Lab, Bajaj Auto, Tata Motors, TCS and Nestle India -- managed to close in the green on Friday. Shares of Sun Pharma, Maruti, Power Grid, Titan and ONGC fell between 2-4%. Friday’s selling pressure came after Sensex hit 75,000 mark for the first time on Tuesday and the market cap of listed stocks on BSE crossed Rs 400 lakh crore on Monday.
“US inflation soared by 0.4% MoM, surpassing expectations and triggering a spike in US Treasury yields. Investors are questioning feasibility of US Fed’s anticipated three rate cuts this year, leading to underperformance in emerging markets,” Vinod Nair, head of research, Geojit Financial Services.