Getting the jitters: Indices slip nearly 1% on renewed rate hike fears

India’s benchmark indices fell close to 1 per cent on Thursday as US Federal Reserve Chairman Jerome Powell’s ambiguous remarks and strong US jobs data sparked worries about the likelihood of higher rates.

After posting gains in the previous three sessions, the Sensex declined 542 points, or 0.9 per cent, to close at 59,806, while the Nifty50 index settled at 17,590, down 165 points, or 0.93 per cent.

Overseas investors sold shares worth Rs 562 crore on Thursday, while domestic institutional investors were net buyers to the tune of Rs 42 crore, according to provisional data from the exchanges. In the preceding three trading sessions, the Sensex had gained 1,439 points, or 2.44 per cent, despite turbulence in global markets.

On Wednesday, Powell had told US lawmakers that the Fed would await fresh data before deciding on the quantum of rate hike this month. However, he reiterated that rates might go higher than anticipated if incoming economic data warranted such a move.

The US Labor Department’s Job Openings and Labor Turnover Survey increased speculation about a 50-basis-point hike.

The number of available positions decreased to 10.8 million in January from 11.2 million in the previous month. The data indicated that the demand for workers was in excess of supply, which would put pressure on wages and inflation.

Market experts said there was a shift towards a regime of lower liquidity and higher rates, which did not augur well for equities. Investors will now be tracking the US payroll data, to be released on Friday, for further cues.

“Domestic equities finally succumbed to global pressure after three days of the positive move. Renewed concerns over higher interest rates have dented global sentiment. Weak global cues are likely to keep the market volatile in a broader range,” said Siddhartha Khemka, head of research (retail), Motilal Oswal Finacial Services.

Ajit Mishra, VP-technical research, Religare Broking, said markets had been facing hurdles on the rise in the prevailing corrective phase. “Mixed global cues and restricted participation from the index majors are largely weighing on the sentiment. On the index front, the Nifty should hold 17,450 now, or else the tone would again turn bearish. Amid mixed signals, participants should maintain caution while selecting stocks and focus more on overnight risk management,” he said.

The market breadth was weak with 1,987 stocks declining and 1,502 advancing on the BSE. More than two-thirds of the Sensex constituents declined. Reliance Industries declined 2.4 per cent and contributed most to the Sensex decline. ICICI Bank declined 1.8 per cent and TCS fell 1.5 per cent. These three stocks alone accounted for 320 of the 542-point loss on the Sensex.

Most of the sectoral indices on the BSE declined. The BSE Auto index fell the most at 1.7 per cent. The Vix index rose 2.2 per cent.