Equity benchmark indices Sensex and Nifty plunged significantly on Wednesday, falling nearly 2 per cent each intra-day following a hint from US Federal Reserve official Christopher J Waller that there was less urgency for a rate cut.
The Nifty 50 fell 454 points, or 2.06 per cent, closing Wednesday's trading session at 21,578.40, while the Sensex fell 1,628 points, a 2.23 per cent decrease, settling at 71,500.76.
In a speech delivered at The Brookings Institution in Washington, DC, on Tuesday, Governor Waller mentioned that the data received in the last few months is enabling the committee to contemplate a policy rate cut in 2024.
"However, concerns about the sustainability of these data trends require changes in the path of policy to be carefully calibrated and not rushed," he said.
In its December policy, the US Federal Reserve, while maintaining the key interest rate in the range of 5.25-5.5 per cent, hinted at potential rate cuts in 2024. The central bank indicated that it anticipates making three quarter-point cuts to its benchmark interest rate throughout the year.
Banking stocks
Banking stocks witnessed significant selling pressure as all 12 Nifty Bank index constituents traded with cuts in the afternoon. The selling activity was triggered by negative commentary on heavyweight HDFC Bank's below-par December numbers, impacting sentiment across the sector.
HDFC Bank, which holds a weightage of over 29 percent in Nifty Bank, experienced a decline of nearly 8 per cent, exerting pressure on the sectoral index, which was down by about 4.50 per cent. The weakness in HDFC Bank's performance also influenced other lenders, causing them to decline as well.
Other key players in the Nifty Bank index, including IndusInd Bank, ICICI Bank, Kotak Mahindra Bank, SBI, and Axis Bank, which collectively contribute to nearly 49 percent of the index's weightage, saw losses ranging from 2 to 4 percent. The negative sentiment surrounding HDFC Bank's results had a cascading effect on the broader banking sector during the trading session.
Asian markets
Asian markets experienced losses, following the downward trend seen on Wall Street. The situation was exacerbated by China's fourth-quarter GDP slightly missing estimates, growing at 5.2 percent over the previous year. Hong Kong's Hang Seng index plummeted by 3.7 percent, while both the CSI 300 and Kospi also recorded declines of over 2 percent each. The Nikkei in Japan dipped by 0.4 percent amid the overall negative sentiment in the region.
READ MORE: Sensex plunges 1,628 points, Nifty down 2.06 per cent in biggest single day loss since June 2022
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