Domestic benchmark indices Sensex and Nifty fell one per cent on heavy selling after Bank of Japan raised interest rates for the first time in 17 years and caution ahead of the outcome of the United States’ Federal Reserve meeting.
The BSE’s Sensex tanked 1.01 per cent, or 736.37 per cent, to close at 72,012.05, while the NSE’s Nifty shed 238.25 points, or 1.08 per cent, to finish at 21,817.45.
The Bank of Japan (BOJ) on Tuesday decided to increase interest rates for the first time since 2007, ending the negative interest rates regime of eight years. It raised the interest rate to a range of zero to 0.1 per cent from (–) 0.1 per cent. “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,” said Vinod Nair, Head of Research, Geojit Financial Services. Nomura in a report said amid the BOJ’s gradual normalisation, spillovers to Asia should be limited.
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, Nair said.
Investors preferred to exit long positions ahead of the US Federal Open Market Committee meeting, which will put the spotlight back on the interest rate scenario going ahead. With the sharp fall, Nifty faces resistance at 22,001-22,251 levels and has support in the range of 21,657 to 21,375, said Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd.
According to analysts, the meeting, led by Fed Chair Jerome Powell, is likely to hold rates and may start cutting rates by the second half of the current year.
“Pessimism in the markets continued on the back of broad-based selling, as investors worried over expensive valuations in mid & small-cap stocks are also exiting frontline counters,” Tapse said.
Among sectors, almost all the major sectoral indices were traded in the red but information technology, media and pharma indices lost the most, falling over 2.5 per cent. Of the NSE firms, Bharat Petroleum Corporation Ltd, Tata Consultancy Services, Cipla, Britannia Industries Limited and IndusInd Bank were the stocks that declined the most. The BSE SmallCap and the BSE MidCap dropped 1.04 per cent and 1.36 per cent, respectively.
Foreign portfolio investors (FPIs) net bought Rs 1,421.48 crore of local shares and domestic institutional investors purchased equites worth Rs 7,449.48 crore, the BSE’s provisional data showed.
Read More: Markets tank 1% as investors turn cautious ahead of US Fed meet | Business News