Sensex, Nifty buckle on fear of US Fed resuming rate hike

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Fear of the US Federal Reserve raising interest rates spooked the upside in the market, leading Sensex to lose 505 points and all other sectoral indices, except Auto Bank and Bank PSU, which ended in the red. The rupee also closed at its weakest level in a month.

Similarly, the Nifty 50 index recorded a loss of 165 points to settle at 19,332 in a volatile trading session on Friday. The index initially rose to 19,524 in the morning but came under selling pressure in the latter part of the trading session.

Reservation profit

With a rise of more than 4 percent in the last eight trading sessions, local retail and institutional investors preferred to take profits at a higher level. Foreign Portfolio Investors (FPIs) bought ₹790 crore net worth of shares, while domestic institutional investors (DIIs) sold ₹2,964 crore net worth of shares.

While PSU Banking and Media stocks bucked the downward trend, sectors such as consumer goods and real estate succumbed to selling pressure.

Globally, sentiment worsened after US private jobs data raised the prospect of the Federal Reserve raising interest rates at its next meeting, said Siddhartha Kimka, head of retail research at Motilal Oswal Financial Services. He said investors were looking forward to the release of the US Nonfarm Payrolls late Friday to provide further clues to the Fed’s policy outlook.

Going forward, markets are likely to maintain the current momentum, as actions for the stock pick up with the start of the first quarter earnings season of FY24, he said.

Increased volatility

Investors remained cautious, considering the potential negative impact of the impending interest rate hike, the strength of the US dollar and higher crude oil prices supported by the OPEC production cut.

Vinod Nair, head of research, Geojit Financial Services, said the rising trade tensions between the US and China, along with the uncertainty created by the hawkish FOMC meeting minutes, tested the risk appetite of global investors. He added that the sharp increase in private payroll data in the United States has led to expectations of a prolongation of the high interest rate environment, which has led to higher US bond yields and increased volatility in global stocks.

weak rs

The rupee closed Friday at its lowest level in more than a month in the wake of the dollar’s rally. The Indian currency, which opened lower at 82.65, closed at 82.74 per dollar, down 23 paisa compared to the previous close at 82.51.

The dollar index strengthened on expectations that the US Federal Reserve will resume interest rates on the back of strong labor market data. This affected Asian currencies, including the rupee, said Rama Chandra Reddy, head of treasury at Karur Visya Bank. Overall, the rupee has weakened by 70 pesos in a week (last Friday to this Friday).