The benchmark Sensex on fell 406 points, the biggest drop in 11 weeks, as most European and Asian stocks declined on fresh concerns the US Federal Reserve will ease its stimulus programme as the economy improves.
All 30 stocks on the S&P BSE Sensex ended with losses, with ITC, HDFC, Reliance Industries and Infosys accounting for 171 points of the decline. Sesa Sterlite, Larsen & Toubro, BHEL and NTPC were the biggest losers on the Sensex.
All 13 sectoral indices on the BSE fell, led by bank, capital goods and realty shares.
The Sensex opened lower and declined steadily to close at 20,229.05, a drop of 406.08 points or 1.97 percent. It was the biggest fall for the index since September 3, when the measure lost 652 points or 3.45 percent.
The CNX Nifty index on the National Stock Exchange closed at 5,999.05, losing 123.85 points or 2.02 percent. The SX40 on the MCX Stock Exchange fell 237.62 points to 12,008.28.
“The Fed is looking to taper down its USD 85 billion in monthly bond buying due to new economic data that suggests that the employment situation in the US is improving,” said Raghu Kumar, Co-founder of RKSV. “If the economy continues to improve as per expectations, then we can expect the Fed to slowly begin tapering its quantitative easing.”
Fed officials expected “data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months,” according to the minutes of the Federal Open Market Committee meeting on October 29-30.
Overseas investment in stocks declined to net Rs 80.4 crore yesterday from Rs 1,014.61 crore a day earlier, according to provisional stock exchange data.
The rupee dropped for the second straight day against the dollar and traded at 62.97.
Stocks in Asia, barring Japan, declined on tapering concerns and after an index of Chinese manufacturing fell.
The Hang Seng Index, the Shanghai Composite Index, Korea’s KOSPI and the Straits Times Index in Singapore closed lower. In Europe, Germany’s DAX and France’s CAC 40 were down, while the FTSE 100 was up.
Total investor wealth on the BSE dipped by Rs 1.18 lakh crore to Rs 66,38,849 crore.
“Markets closed in the red again today, following some bearish sentiment and selling pressure from traders and investors,” said Jignesh Chaudhary, Head of Research at Veracity Broking Services. “This, coupled with Federal Reserve minutes declared late yesterday evening suggesting more willingness among Fed officials to slow its bond-buying programme, created more pressure in the market.”
Easing of the US Fed’s stimulus programme may reduce funds available for investment in emerging markets, including India.
“While a potential liquidity withdrawal will impact developing markets, improved fundamentals may make foreign flows more sticky and lead to outperformance by India,” said Dipen Shah, Head of Private Client Group Research at Kotak Securities.
“Introduction of more fiscal reforms and effective implementation of the reforms are the prerequisites for the markets to sustain their current valuations and improve upon them,” Shah said.
The top losers on the Sensex were Sesa Sterlite (-3.91 percent), HDFC (-3.61 percent), Larsen (-2.86 percent), BHEL (-2.7 percent) and NTPC (-2.63 percent).
Among the S&P BSE sectoral indices, Bankex dropped by 2.49 percent, followed by Capital Goods 2.37 percent, Realty 2.29 percent, Power 2.06 percent and PSU 2 percent.
The market breadth remained negative as 1,552 stocks declined, 922 advanced and 137 ruled steady. Total turnover dropped to Rs 1,812.02 crore from Rs 2,136.90 crore yesterday.
PTI