Mumbai: Hit by fears over the impact of the US Fed announcing a cut in its stimulus, the benchmark Sensex dived over 151 points at the close today on selling in banking, capital goods and power shares.
The Federal Open Market Committee yesterday announced a plan to cut monthly bond purchases to USD 75 billion from next month compared to USD 85 billion now, a decision that is expected to cause some volatility in emerging market assets. After opening with a 100-point rise on firm Asian cues, the Sensex hit day's high of 21,017.45 but the gains proved to be short-lived as nervous investors resorted to selling. It fell by 151.24 points, or 0.73 per cent, to 20,708.62.
In the 30-share index index, 19 stocks led by Reliance Industries, ICICI Bank, State Bank of India, ITC, HDFC Bank, Hero MotoCorp and Larsen & Toubro dropped. “Emerging market economies (EMEs) have been caught off guard on the timing of the Fed decision, as consensus seemed set on March 2014.
Chances of a capital flight to the US and a strong USD are real, and EMEs could suffer as higher than expected equity and debt outflows can materialise than already priced in,” said Ashish Kumar, Economist, Elara Securities in a report.
