The Indian equity benchmarks buckled under selling pressure for the third straight session on September 21 after the US Federal Reserve maintained the status quo in its policy meeting but indicated that interest rates will remain higher for longer.
Unabated selling by foreign institutional investors (FII) and elevated crude oil prices added to the gloom.
At 12.01 pm, the 30-pack Sensex was trading 546.61 points, or 0.82 percent, lower at 66,254.23, while the broader Nifty slumped 145.25 points, or 0.73 percent, to 19,756.61.
A total of 1,702 stocks advanced, 1,736 declined and 188 counters remained unchanged on the BSE.
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Sectors and stocks
Sector wise, IT, FMCG, auto, financial services, banks, capital goods and consumer discretionary were trading in the red, while energy, realty, oil & gas, metal and services logged gains.
The BSE Midcap index inched up 0.06 percent and the smallcap index rose 0.09 percent.
M&M was the top laggard in the Sensex pack, skidding over 2 percent, followed by ICICI Bank, TCS, Bajaj Finserv, ITC, HCL Tech and Tata Motors.
Only two counters were trading in the green – Tech Mahindra and Tata Steel.
Beyond the largecap space, shares of SJVN tanked 9 percent in early trade after the government launched an offer for sale (OFS) for up to 4.92-percent equity at a deeply discounted floor price.
The government announced an OFS to sell 9.67 crore shares, or 2.46 percent stake in SJVN, with an option to sell another 2.46 percent by retaining oversubscription. SJVN OFS opened for non-retail investors on September 21 and will open for retail investors the next day.
The floor price of the offer is set at Rs 69 a share, which is at 15 percent discount to the previous closing price.
Sewerage solutions provider EMS Limited made a strong debut on the bourses on September 21, listing at a 33.67 percent premium to its issue price. The stock started trading on the NSE at Rs 282.05 and on the BSE at Rs 281.55, while its issue price was Rs 211.
Also Read: India's twin deficit challenge resurfaces as crude nears $95
On the global front, Asian stocks followed Wall Street lower, with MSCI's broadest index of Asia-Pacific shares outside Japan dropping 0.4 percent by early afternoon Hong Kong time. Japan's Nikkei slid 0.6 percent. China's blue-chip index dipped 0.6 percent, while Hong Kong's benchmark shed 1.3 percent.
Hawkish Fed, FII selling
The US Federal Reserve held interest rates steady on September 20 but hardened its hawkish stance, with a further rate increase projected by the end of the year and monetary policy kept significantly tighter through 2024 than previously expected.
As they did in June, Fed policymakers at the median still see the central bank's benchmark overnight interest rate peaking this year in the 5.5-5.75 percent range, just a quarter of a percentage point above the current range.
Also read: US Federal Reserve leaves rates unchanged, sees tighter policy through 2024
But from there, the Fed's updated quarterly projections show rates falling only half a percentage point in 2024 compared to the full percentage point of cuts anticipated at the meeting in June.
"Inflation remains elevated," the rate-setting Federal Open Market Committee (FOMC) said in a policy statement that included projections incorporating stronger economic and job growth than prior forecasts, and keeping prospects for a "soft landing" squarely in view.
On September 20, foreign institutional investors (FIIs) offloaded shares worth a net Rs 3,110 crore. So far this month, FIIs have sold Rs 5,213 crore worth of domestic equities.
"Even though the ‘hawkish pause’ from the Fed was on expected lines, the US markets reacted negatively since the indication from the Fed is that rates will remain ‘higher for longer’… As the Fed chief said, “soft landing is a plausible scenario.” This narrative is likely to help the mother market consolidate around the current levels, supporting other markets, too, without any sharp corrections,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
For Nifty, the biggest drag will be more FII selling in response to the rising dollar and US bond yields.
“Domestic consumption stories like automobiles, hotels and real estate are on strong wicket and the capital goods segment has been witnessing buying in recent weeks even when FIIs were sellers in the market. PSU banks are likely to witness renewed buying on declines since their valuations are attractive and prospects look good," he added.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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