CHENNAI: Domestic equity market declined sharply on Wednesday with benchmark indices- BSE Sensex and NSE Nifty50 crashing more than 1% each because of high valuation concerns and sell-off in index heavyweights TCS, Infosys and Reliance and weak Asian cues after Japan’s central bank hiked interest rates after a gap of 17 years. The Bank of Japan (BoJ) increased its key interest rate from -0.1% to a range of 0%-0.1%.
Global equity markets were under pressure ahead of the US Federal Reserve’s interest rate decision this week. While it is believed that the Fed would keep rates unchanged, focus is on Fed Chair Jerome Powell’s comments related to future course of actions, especially its stance on recent inflation data.
Sensex fell 736 points, or 1.01%, to close the Wednesday session at 72,012.05 while the Nifty 50 closed the day at 21,817.45, down 238 points, or 1.08%. Following the fall over the past two weeks, Sensex’s return has turned in 2024 while Nifty is trading at a flat level. Between March 7 and March 19, the two indexes have corrected by nearly 3% each.
“Following the BoJ’s decision to hike interest rates for the first time in 17 years, the Asian peers’ mood turned sour, which pulled the Indian market to continue its recent pessimism. The correction in the domestic market has also been triggered by concerns over premium valuations and the delay of rate cuts by the US Fed due to hotter-than-expected inflation, which is evident from the upward trend in the dollar index,” said Vinod Nair, Head of Research, Geojit Financial Services.
The rupee depreciated by 13 paise, closing at Rs 83.04 against the US dollar, the lowest level in a month. The decline was driven by a significant rise in the dollar index, which surged by $0.70 to $103.70.
The broader market fell steeper than benchmarks as Nifty Midcap 100 and Nifty SmallCap 100 shed about 1.20% point each. Small and mid stocks have been under pressure since late February following market regulator Sebi’s warning that “froth” is building up in the broader market.
Owing to this widespread sell-off, investors lost a whopping Rs 5 lakh crore on Wednesday as the m-cap of all BSE listed dropped to nearly Rs 373.9 lakh crore from Rs 378.8 lakh crore in the previous session. Brokerage Phillip Capital said the market is highly overbought from a long-term perspective.