Indices slump on global selloff

Mumbai: India's equity indices slumped on Thursday, snapping their two-day winning streak amid a global sell-off in risk assets as investors negatively reacted to hawkish commentary by US Federal Reserve chair Jerome Powell.

Market participants said Powell's remarks that the American central bank would increase interest rates further next year even if the economy slips into a possible recession dented sentiment.

The BSE Sensex ended at 61,799.03, down 878.88 points or 1.40%. The NSE Nifty closed at 18,414.90, down 245.40 points or 1.32%. The downside in both indices was limited for most of the trading session but a late sell-off caused losses to deepen.

Nifty has Support at 18,350
"The market was not prepared for the US benchmark rates to cross beyond 5%," said Ajay Garg, founder and MD, Equirus Capital.

"The hawkish commentary by the US Federal Reserve resulted in a knee-jerk reaction and some amount of profit booking after an 11% rise in the last two months."

Garg expects the fall in Indian equities to be a minor one due to the global sell-off.

The Nifty has crucial support at 18,350 levels and if that breaks, it could drift lower toward 18,100-18,000 levels, said Nagaraj Shetti, technical and derivative analyst, HDFC Securities. "We do not expect a large sell-off from here," Shetti added.

On Wednesday, Powell placed the terminal rate - or the point where officials expect to end the rate hikes - at 5.1%, higher by 50 basis points compared with September projections. A basis point is 0.01 percentage point. "The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases," Powell said after the Fed on Wednesday increased the policy rate by 50 basis points following four consecutive 75-basis point hikes. "But it will take substantially more evidence to give confidence that inflation is on a sustained downward path."

The US markets on Wednesday surrendered their gains after the Fed rate announcement. The Dow Jones lost nearly 700 points or 2% from the day's high. This rubbed off on Asian stocks with key averages falling 0.3-1.5% and the emerging market currency basket weakening against the dollar, considered a safe haven. Wall Street indices continued to slide on Thursday with the Dow on track for its steepest single-day fall in three months. The benchmark S&P 500 and tech-heavy Nasdaq were also set to notch their worst single-day performance in six weeks. At the time of going to press, Dow Jones was down 2.40%, S&P was down 2.61% and the Nasdaq was down 3.03%.

Shares in the euro zone also fell 3.1% to their lowest level in a month while the broader Stoxx 600 index posted its worst daily performance since May after the European Central Bank raised interest rates by half a percentage point and, like the Fed on Wednesday, kept further hikes firmly on the table to bring runaway inflation under control.

Brent crude oil prices were little changed at $77.3 a barrel. Crude oil dropped 5% over the past week.

In India, foreign portfolio investors were net sellers to the tune of ₹710.74 crore, according to provisional exchange data. Their domestic counterparts purchased equities in the cash segment worth a net ₹260.92 crore, data showed.

Of the 30 Sensex companies, 27 ended down. Selling in tech, metals and mining, and oil and gas stocks dragged the markets lower. Tech Mahindra was the top loser, falling 4%. Infosys and Titan lost 2.6% each, while index heavyweights HDFC and ITC fell 2.1% and 1.9%, respectively.