Sensex Falls 151 Points After Fed Begins Tapering
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The BSE Sensex slipped on 19 December' 2013, falling for a seventh session out of eight, as blue chips such as ICICI Bank declined after the US Federal Reserve announced the start of its tapering, raising concerns about foreign selling.
The fall came even as global shares took the Fed's decision to trim its bond buying by $10 billion to $75 billion a month largely in their stride while the finance minister said the country is better prepared to deal with US tapering now.
Overseas investors are net buyers of more than $18 billion worth of shares so far this year, the biggest in emerging Asia, according to Deutsche Bank data earlier this month, which also makes the country vulnerable to potential selling.
Investors say the prospect of rate hikes from the Reserve Bank of India could also weigh on shares, despite the relief rally on Wednesday after the central bank surprised investors by keeping monetary policy on hold.
Shares have thus steadily retreated from record highs hit on December 9, with the BSE Sensex 3.7 per cent away from an all-time high of 21,483.94.
"One of the big questions post Fed's move is whether liquidity will continue flowing to emerging markets like India or not. If rates go up in US then it will be risk for EMs," said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
The benchmark BSE Sensex fell 0.73 per cent, or 151.24 points, to end at 20,708.62,
The broader Nifty declined 0.81 per cent, or 50.50 points, to end at 6,166.65, closing below the psychologically important 6,200 level.
However, NSE's volatility index, or the domestic equivalent of the VIX fear gauge, marked its lowest level since May 7 intraday after the RBI and Fed's moves pointing towards some bets on stability in the markets soon.
Among blue chips, rate sensitive stocks especially banks led the fall on possible risk aversion on US Federal Reserve tapering and potential hike in interest rates in the near term if inflation fails to cool down.
In private banks, ICICI Bank Ltd fell 3 per cent, HDFC Bank Ltd ended 2.1 per cent lower, while Kotak Mahindra Bank lost 3.8 per cent.
State owned banks which outperformed their private sector peers on Wednesday on expectations of bond portfolio gains after RBI kept interest rates unchanged also reversed gains.
State Bank of India Ltd fell 1.8 per cent while Punjab National Bank Ltd ended 1.7 per cent lower.
Among non-banking lenders, Housing Development Finance Corp Ltd ended down 2.8 per cent, while IDFC Ltd fell 2.2 per cent.
In auto stocks, Hero MotoCorp Ltd fell 1.9 per cent while Mahindra and Mahindra Ltd lost 1 per cent.
Power Grid Corp of India Ltd closed 0.8 per cent lower as the Rs 700 billion of shares it recently sold became eligible to trade on Thursday, marking its second highest volume on NSE in a day since its listing in Oct 2007.
However among stocks that gained, software service exporters rose as a strengthening dollar on the back of the Fed taper could weaken the rupee, improving margins from overseas.
Tata Consultancy Services Ltd gained 1.3 per cent, while Infosys Ltd rose 1.6 per cent after earlier touching a record high of Rs 3,544.95.
Wockhardt Ltd surged 10.1 per cent, marking its third consecutive day of gains, on listing plans of unit Wockhardt Bio AG on the Berne Stock Exchange in Switzerland.