Sensex and Nifty fall 0.7% as Fed’s cautious outlook dampens investor sentiment

Mumbai: Indian stock indices fell more than half a percent on Thursday as the US Federal Reserve’s cautious outlook on interest rate cuts for the rest of the year dampened investor sentiment.

The NSE Nifty ended at 25,877.85, down 0.7%, or 176.05 points. The BSE Sensex ended at 84,404.46, down 0.7% or 592.67 points.

The US Federal Reserve cut rates by 25 basis points on Wednesday, but Fed Chairman Jerome Powell indicated no further rate cuts are expected this year due to the lack of official data due to a federal shutdown in the US.

“The US Federal Reserve has indicated that no interest rate cut is expected in December, which disappointed investors and even global indices fell,” said Shrikant Chouhan, head of research at Kotak Securities. “Given that the index was trading at a yearly high, profit booking led to some decline.”

Elsewhere in Asia, China fell 0.7%, while Hong Kong fell 0.2%. Taiwan finished marginally lower. However, South Korea and Japan rose 0.1%.

“Markets were expecting a dovish stance from the US Federal Reserve, but the likelihood of no further rate cuts this year dented sentiment in today’s session,” said Ajit Mishra, SVP Research at Religare Broking. “The lack of further interest rate cuts could lead to a decline in interest from foreign investors.” The Sensex and Nifty are about 1.5% off their record highs seen at the end of September last year. Foreign portfolio investors (FPIs) sold shares worth a net ₹3,077.6 crore on Thursday. Their domestic counterparts bought shares worth ₹2,469.3 crore. In October, global investors bought shares worth ₹7,999.6 crore.

Chouhan said no major foreign inflows are expected as US 10-year bond yields are likely to remain above 4% if there are no further rate cuts.

“If the currency continues to weaken, foreign flows are expected to be volatile,” he said.

The rupee fell to 88.7 on Thursday after closing at 87.84 a week ago. The rupee weakened to a low of 88.95/$1 two weeks ago, but Reserve Bank intervention helped contain losses and prevented the rupee from depreciating beyond 89/$1.

The Nifty Mid-cap 150 fell 0.2%, while the Small-cap 250 index ended marginally lower. Of the 4,322 shares traded on BSE, 1,807 advanced while 2,363 declined.

Over the past week, the midcap and smallcap indices rose almost 1% each.