Persistent FPI outflow: Sensex tumbles 773 pts on Fed rate hike fears

Snapping the three-day rally, the Sensex closed 1.3% lower at 58,152.92 while the Nifty settled at 17,374.75 points, down 231.10 points or 1.3%.

The Sensex nose-dived over 1,000 points intra-day to slip below 58,000 on Friday as fears of aggressive rate hikes by the US Federal Reserve amid elevated inflation spooked investors. Markets in the US, too, heavily fell overnight tracking comments from Federal Reserve president James Bullard calling to hike interest rates by 1% from July. Persistent outflows from foreign portfolio investors further dampened the sentiment.

Snapping the three-day rally, the Sensex closed lower by 773.11 points or 1.3% at 58,152.92 while the Nifty settled at 17,374.75 points, down 231.10 points or 1.3%. The broader markets were the worst hit during the day. Both the BSE mid-cap and small-cap indices fell 1.9%. All sectoral indices also ended in the red – with IT and PSU Bank being the top losers, falling over 2% each.

Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services, said: “Following the global trend, domestic equities, too, witnessed sell-off after three days of rise. The Nifty opened lower and remained under pressure throughout. It closed with losses of 231 points (-1.3%) at 17,374 levels. The broader market underperformed and closed with loss of 2%. Global markets witnessed a free fall after the release of US consumer inflation data – which surged 7.5% YoY in January, the biggest annual increase in past four decades.”

Shares of newly-listed technology stocks witnessed heavy selling throughout the day as rich valuations of these companies worried investors, experts said. Zomato declined near its record low and closed down by 6.08%. Shares of Policybazaar, Paytm and Nykaa declined 9.9%, 4.04% and 3.3%, respectively.

“Rich valuations were a concern in the market for quite some time, especially high valuations of all newly-listed tech businesses. Globally also, tech stocks with high PE have been falling for some time. Rising inflation and the possibility of rate increase are adding to sell-off,” Suresh Shukla, joint president, Kotak Securities, told FE.

Tech Mahindra was the top loser in the Sensex pack, down 2.9%. Infosys, UltraTech Cement, HCL Tech, Wipro, and SBI were other top laggards. On the other hand, IndusInd Bank, Tata Steel and NTPC ended in the green. Overall, the market breadth remained negative as 2,378 shares declined and 932 advanced on the BSE.

Volatility is expected to remain elevated in near term as investors will now take cues from global factors amid the end of the earnings season in the coming week, said analysts.

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