Sensex, Nifty slip 0.7% as Fed’s cautious outlook damps investor sentiment

Mumbai: India's equity indices fell over half a per cent on Thursday as the US Federal Reserve's cautious outlook on interest rate cuts for the rest of the year tempered investor sentiment.

The NSE Nifty finished at 25,877.85, down 0.7%, or 176.05 points. The BSE Sensex ended at 84,404.46, 0.7%, or 592.67 points lower.

The US Federal Reserve slashed interest rates by 25 basis points on Wednesday, but Fed Chair Jerome Powell indicated that no further rate cuts are expected this year in the absence of official data due to a federal shutdown in the US.

"The US Federal Reserve indicated that no interest rate cut is expected in December, which disappointed investors,s and even global indices slid lower," said Shrikant Chouhan, head of research, Kotak Securities. "Given that the index was trading at a yearly high, profit booking led to some decline."

Agencies

Nifty, Sensex close 0.7% down l No major foreign inflows anticipated as the US 10-year yield is expected to remain above 4% in absence of any further cuts in interest rates

Elsewhere in Asia, China declined 0.7% while Hong Kong slid 0.2%. Taiwan ended marginally lower. However, South Korea and Japan rose 0.1%.

"The markets were anticipating a dovish stance by the US Federal Reserve, but the likelihood of no further rate cuts this year dented sentiment in today's session," said Ajit Mishra, SVP Research, Religare Broking. "The lack of further rate cuts could lead to foreign investor interest fading away."

The Sensex and Nifty are around 1.5% away from their record closing levels hit in late September last year.

Foreign portfolio investors (FPIs) sold shares worth a net ₹3,077.6 crore on Thursday. Their domestic counterparts bought shares worth ₹2,469.3 crore. In October, global investors bought shares worth ₹7,999.6 crore.

Chouhan said no major foreign inflows are anticipated as the US 10-year bond yield is likely to remain above 4% in the absence of any further rate cuts.

"If currency continues to weaken, then the foreign flows are expected to be volatile," he said.

The rupee dropped to 88.7 on Thursday after closing at 87.84 a week ago. The rupee weakened to its record low of 88.95/$1 two weeks ago, but intervention by the Reserve Bank helped contain losses and prevented the rupee from depreciating past the 89/$1 mark.

The Nifty Mid-cap 150 declined 0.2% while the Small-cap 250 index ended marginally lower. Out of the 4,322 shares traded on BSE, 1,807 advanced, while 2,363 declined.

In the past week, the mid-cap and small-cap indices climbed close to 1% each.