 "Indian equities fall for 4th straight session after hawkish US Fed forecast")
Indian equities declined for the fourth straight session after the US Federal Reserve forecasted only two reductions in policy rates in 2025, contrary to expectations of three to four cuts.
The Sensex fell 940 points, or 1.2 per cent, to 79,242.61, while the 50-share Nifty index closed at 23,952, down 247 points, or 1.02 per cent. In the last four sessions, the Sensex declined by 3.5 per cent and Nifty by 3.3 per cent.
The sell-off shaved off investor wealth by Rs 2.8 trillion, extending the four-day drop to almost Rs 10 trillion. FPIs on Thursday were net sellers to the tune of Rs 4,225 crore, while domestic institutions bought shares worth Rs 3,943 crore. This week, FPIs have pulled out Rs 12,000 crore from the secondary market.
The Federal Reserve officials on Wednesday lowered their benchmark interest rate for a third consecutive time to a range of 4.25-4.5 per cent but reduced the number of cuts they anticipate in 2025 due to inflationary concerns.
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“Markets were expecting more cuts, so the Fed forecast of two rate cuts next year is a negative. Next year could be volatile, and broad indices level growth will be in the low teens. But stock picking opportunities will be there,” said Dhiraj Relli, managing director and CEO of HDFC Securities.
Domestic equities have seen a selloff this week as a weakening rupee and concerns over FPIs reallocating funds from Indian equities to the US markets rattled investors. Analysts have warned of continued volatility in equity markets, citing headwinds such as slowing domestic earnings growth and gross domestic product (GDP), as well as expensive valuations.
“The Bank of Japan's decision to keep its interest rate steady, which surprised economists, aided in reducing the selling pressure. Despite this, investor caution persisted amid ongoing FII selling, with a strategic shift towards defensive sectors like pharma as evidenced by their outperformance,” said Vinod Nair, head of research of Geojit Financial Services.
The market breadth was negative, with 2,414 stocks declining and 1,589 advancing. Barring three, all Sensex stocks declined. ICICI Bank, which declined 2 per cent, was the biggest contributor to the Sensex's decline, followed by Reliance Industries, which fell 1.8 per cent.