Benchmark indices came under pressure for the fourth straight session as investors remained cautious ahead of the Federal Reserve policy outcome even as factors such as an uptick in inflation and rising number of Covid-19 cases weighed on the sentiment.
While the Sensex tumbled 562.34 points, the broader NSE Nifty slumped 189.15 points, or 1.27 per cent, to 14721.30.
Experts feel that share prices are likely to face hurdles such as rising bond yields and dearer commodity prices which could have implications on the RBI’s monetary policy.
On Wednesday, Standard & Poor’s (S&P) said India and the Philippines are the most vulnerable during the current times of “reflation trade” that have seen a rise in US bond yields even as it warned that these economies could also see capital outflows which could lead to central banks hiking interest rates.
The rating agency recalled events during the taper tantrum of 2013 since India and Indonesia had to hike key policy rates then as their currencies plunged against the dollar.
“In our view, India and the Philippines are the most vulnerable at the current juncture. Both economies have seen inflation rise in recent months. Real policy rates are below long-run average levels, eroding the return buffers,” the rating agency said.
“Capital may be quicker to leave and the central banks may have to raise policy rates. One mitigating factor for both countries is that current accounts are stronger relative to normal levels,” S&P noted.
While the stock markets were on a bullish phase after the unlock began last year and roll out of the Covid-19 vaccine, it has faced obstacles in recent times like rising US bond yields which has led to apprehensions that FPIs could take money out of riskier assets in emerging economies like India.
In today’s trade, investors awaited outcome of the Federal Open Market Committee (FOMC) meeting. The focus remains on whether the Fed will indicate any unwinding of its low-interest rate policy.
"Caution descended on markets on Wednesday with world stocks holding below recent record highs as investors waited to see whether the U.S. Federal Reserve tonight would signal a faster path toward policy normalisation than previously expected’’, Deepak Jasani, Head of Retail Research, HDFC Securities said.
The 30-share Sensex displayed volatility as it opened higher at 50,436.02 and hit a day’s low of 49718.65. it thereafter tanked 562.34 points or 1.12 per cent to close at 49,801.62. ONGC was the top loser in the Sensex pack, declining around 5 per cent, followed by NTPC, Sun Pharma, SBI, IndusInd Bank, Bajaj Auto, PowerGrid and Reliance Industries.
On the other hand, ITC, Infosys, TCS and HDFC were among the gainers.
Elsewhere in Asia, bourses in Shanghai, Tokyo and Seoul ended on a negative note.
