Sensex tanks on interest rate hike fears
Jan. 7: A lethal combination of fear about an interest rate hike and the result of an opinion poll sent the equity markets into a tailspin on Friday. On Thursday, India saw very high food inflation numbers, leading to fears of a rate hike. On Friday, there was a news agency report of a poll conducted by AC Nielsen which suggests lower public support for Congress.
The Sensex lost over 500 points intra-day, but closed 492.93 points down at 19,691.81 breaching the psychological 20,000 mark. The Nifty closed at 5,904.60 down 143.65 points. The bloodbath started after 1.30 pm and there was no respite. Before the earnings season the markets either are nervous or there is a correction. Since earnings are going to be good the markets corrected, said Mr Kishor Ostwal of CMI Research.
“The bears raided the markets creating mayhem,” said Mr Alex Mathews of Geojit BNP Paribas Financial Services. On the domestic front, institutional investors adopted a ‘basket selling’ strategy. Sectors such as banking, consumer durable, FMCG, realty, IT and auto sector stocks were hit very badly.
The markets opened on a minor negative note and saw some recovery in the initial session but in the second part of the day they slipped again with Nifty closing below 5,950.
The domestic markets got no support from the Asian or European markets. Asia was mostly down as commodity prices were weak lead by the mining companies. The European markets too fell as the German retail sales declined to 2.4 per cent from 0.1 per cent and the German trade balance fell.
All eyes are on the US which is expected to come with data on non-farm payrolls, unemployment rate and US average hourly earnings. The immediate Nifty support will be at 5,830-5,820 and movements below these levels can cause a further downtrend, he said.
Mr Deven Choksey of K.R. Choksey attributes Friday’s bloodbath to the FIIs selling off their $-pegged India market portfolio as the dollar is showing signs of strengthening now. There are “Fears of political instability under high food inflation and the inability of the government to come out clear under corruption charges,” Mr Choksey said.
What is surprising about Friday’s fall is “The deep cuts came on the back of heavy trading volumes. After a long time, we saw strong volumes,” said Mr Amar Ambani of IIFL.
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