MUMBAI: India’s equity market fell sharply on Thursday following a cautious Federal Reserve commentary and weak global cues. Falling for the fourth straight session, the BSE Sensex and NSE Nifty50 have given up key support levels of 80,000 and 24,000, respectively.
At Thursday’s close, the Sensex was down 964.15 points or 1.20% at 79,218.05 while Nifty fell 247.15 points or 1.02% to settle at 23,951.70. The 4-day selling has wiped out investors' wealth by more than Rs 10 lakh crore.
The selling intensified on Thursday after the US Federal Reserve gave a hawkish commentary on future rate cute. While the Fed reduced interest rates by 0.25% to 4.5% late Wednesday, it gave strong indications that there would be only two rate cuts next year, instead of the anticipated 75-100 basis points. According to experts, this reflects inflationary pressures, as inflation remains above the Fed’s 2% target.
The immediate impact of the FOMC meeting outcome was seen in the US equity and bond market. Rising US bond yields have pushed global currencies, including the rupee to new lows on Thursday. The local currency slipped past 85 to the US dollar for the first time. Experts believe that such as steep fall may lead to foreign fund outflows from domestic equities in the short term.
“While the decision was widely expected, the forward guidance surprised markets, as Fed Chair Jerome Powell indicated expectations for two additional cuts in 2025. Powell emphasized the Fed’s commitment to economic stability but cautioned that inflation may take one to two years to return to the 2% target,” said Ravi Singh, SVP- Retail Research, Religare Broking.
Singh added that the rate cut may cause short-term liquidity concerns, but its long-term impact is expected to be limited, reflecting the Fed’s careful balancing act in navigating economic uncertainties.
“The realisation that rate cuts are not coming soon spiked the US 10-year bond yields above 4.5%. Dow Jones too continued with its losing streak for 10th day and the S&P 500 fell sharply by 3% in a day. If the bond yields continue to move higher then US markets could witness further cuts going into the new year. Our markets won't have much an option but will follow suit,” said Apurva Sheth, Head of Market Perspectives and Research.
In the Nifty50 pack, Bajaj Finance, Bajaj Finserv, Asian Paints, JSW Steel, and Grasim were the top laggards, falling by up to 2.33 per cent. The broader markets also faced selling pressure with Nifty Midcap100 and Nifty Smallcap100 indices ending lower by 0.28% and 0.51%, respectively. Except for Nifty Pharma and Healthcare, all sectoral indices closed in the red. Banking, IT, Financial Services, Consumer Durables and Metal indices fell about 1% each.