Fed minutes spark sell off; volatility back in market

The main reason we saw a washout on D-Street today, were all global. Nifty had a big jolt and closed below 6,000.

The minutes of last night’s Fed meeting seemed to suggest that a lot of members of the Fed did not want quantitative easing (QE) to continue, which sparked of sell-off in the late trade, in the US market and was picked up in Asia Thursday morning. There were also some apprehensions coming through from Japan that the huge liquidity pumped in by the Japanese government bonds (JGB) might also be a temporary affair. So, the Japanese market was down 8 percent. In fact, trading was halted in Japan at one point in Futures market. Therefore, Asia was a sea of red, Europe started off quite weak and the general liquidity scare throughout the day kept markets on tenterhooks. That was the primary reason for our stock market to fall 125 points today. The rupee too slipped to 56 to the dollar. Also read: State Bank of India Q4 net falls 19%; provisions drag Moreover, awful results from State Bank of India (SBI) on back of disappointment from Larsen and Toubro (L&T) too did not help. SBI was down 8 percent and Ranbaxy too where the newsflow of late has been quite awful was down 10 percent. We also saw some big falls in names like DLF, Jaiprakash Associates and Reliance Industries. All the bank stocks were down and the Bank Nifty ended 3 percentage points down. So, there was no place to hide for the market today. The breadth was awful. The midcap index did very poorly and there too high beta stocks were singled out for punishment; Anil Dhirubhai Ambani Group (ADAG) was hammered, real estate stocks like Unitech, HDIL and Indiabulls Real Estate fell very sharply. Wockhardt was down 20 percent, and even stocks like SKS Microfinance, Dish TV, Crompton Greaves, and IVRCL saw some intense pain today. So, once again volatility has come back to the market. After, Nifty’s very smooth ride to 6,200 it is below 6,000 yet again.