Equity benchmarks succumbed to five-month lows on Thursday as hawkish comments by the US Federal Reserve dented sentiments that have remained bearish since last month after finance minister Nirmala Sitharaman imposed a higher surcharge on certain foreign portfolio investors (FPIs).
After a weak opening, the 30-share BSE Sensex plunged more than 750 points in late-afternoon trade, before ending at 37018.32, down 462.80 points, or 1.23 per cent.
The broader NSE Nifty dropped 138 points, or 1.24 per cent, to close below the key 11000-mark at 10980.00.
This is the lowest closing level for both the key indices since early March.
Weak economic data, unabated foreign fund outflows and disappointing quarterly earnings also weighed on market sentiment.
Official data released after market hours on Wednesday showed that the growth of eight core industries dropped to 0.2 per cent in June, mainly because of the contraction in oil-related sectors as well as cement production.
Additionally, the government’s fiscal deficit touched Rs 4.32 lakh crore for the June quarter, which is 61.4 per cent of the budget estimate for 2019-20 fiscal.
Major automobile manufacturers on Thursday reported disappointing July sales data, indicating that revival in consumer sentiment is still someway off.
Moreover, foreign investors have sold stocks worth $2 billion in July.
On the global front, the US Federal Reserve reduced the benchmark lending rate by 25 basis points to 2.0-2.25 per cent on Wednesday for the first time in more than a decade. However, US Fed chairman Jerome Powell said the move was not the beginning of a rate cut cycle, sending global markets lower.
“Let me be clear — it’s not the beginning of a long series of rate cuts,” he said at the press conference.
“Indian markets have been in a freefall as FIIs offloaded stocks over the last one month post budget on the back of the impact of high-taxation and concerns of multi-year low economic growth. Further, with the Fed chairman’s statement that the interest rate cut isn’t start of a rate-cut cycle has cut short the excitement of investors, as Fed denied to play to the capital-market gallery.
“The ongoing results season reflects there was a chance that Nifty companies may post de-growth in their net profits for the first time. Investors have been eagerly looking forward for any positive news, as there has been clear overdose of challenging news flow for the past one month,” Jagannadham Thunuguntla, senior vice-president and head of research (wealth), at Centrum Broking said.
In the Sensex pack, Vedanta took the biggest hit (5.55 per cent), followed by Tata Motors, SBI, Yes Bank, Bharti Airtel and Infosys, which lost up to 4.50 per cent. However, Maruti, Power Grid, Reliance, Bajaj Auto and Hero MotoCorp spurted up to 1.86 per cent.