Markets nosedive as investors slip into risk-off mode

Mumbai: Equity benchmarks reeled for the fifth straight day to finish at over one-year lows on Thursday, in tandem with weak global equities, after the US Federal Reserve hiked rates by 75 basis points to tame surging inflation. The US central bank delivered its biggest interest rate hike since 1994 and indicated further policy tightening this year as the focus shifts to taming price rise which has soared to over four-decade highs. The Fed also projected slowing US economic growth. Across-the-board selling played havoc on the domestic indices, with index majors Reliance Industries and HDFC twins contributing most to the decline.

Despite a smart rally in morning trade, the BSE benchmark Sensex failed to hold on to the gains and plummeted 1,045.60 points or 1.99 per cent to settle at 51,495.79 -- the lowest in over 12 months. On similar lines, the NSE Nifty plunged 331.55 points or 2.11 per cent to close at 15,360.60.

Investors lost Rs 5.54 lakh crore in Thursday's session, with the market capitalisation of all BSE-listed firms standing at Rs2,39,20,631.65 crore.

"The early gains led by an in-line Fed policy was dampened as recessionary fears haunted global sentiments. A cut in growth projection and hints of continuation of aggressive policy in the next meeting instilled chances of a recession in the US economy. In this current scenario, safe sectors will be those that are least impacted by inflation and aggressive policy like finance and services. Defensives like consumption, IT, pharma and telecom are worthwhile on a long-term basis," said Vinod Nair, head (research) at Geojit Financial Services.

S Ranganathan, head (research) at LKP Securities, adds: "As the street prepares for further front-loaded action by central banks in a bid to anchor spiralling inflation, its impact on consumer spending kept investors on the backfoot. A mere glance at the stocks hitting one-year lows today is reflective of the risk-off mood on the street as only a handful of FMCG stocks displayed a green tick among frontliners."

Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 3,531.15 crore on Wednesday, as per exchange data. Barring Nestle India, all Sensex stocks closed in the red, led by Tata Steel, Tech Mahindra, Bharti Airtel, Wipro, IndusInd Bank, Bajaj Finance, Kotak Mahindra Bank, NTPC, and Bajaj Finserv, tumbling as much as 6.04 per cent.