Fed tapering plan drags Sensex by 408 points, Nifty below 16,500

Benchmark equity indices opened with a gap down on Friday amid a global market crash led by growth concerns amid the spread of Delta variant and US Federal policy minutes that signal a reduction of its bond-buying programme in 2021. In opening trades, Sensex declined 408 points or 0.73% to 55,221 while the Nifty 50 index was trading at 16,456 lower by 112 points or 0.68%.

‘Taper’ rumours have again started impacting markets. Minutes of the latest Fed meet indicate that tapering of bond purchases may start later this year. This triggered a risk-off in markets with the Dow and S&P 500 correcting by 1.1% each on the 18th. The cut in the Euro Zone was sharper with Euro Stoxx 50 crashing by 2.1%. Brent corrected sharply to $67. The dollar index rose to 93.57 and the US 10-year yield declined to 1.24%,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Tapering is negative news for markets since it will eventually reduce the liquidity available in the financial system. But the positive dimension is that the Fed is indicating tapering since economic growth revival is strong. If growth & earnings recovery is strong, markets are likely to stage a rebound after the initial jitters. With retail investors in exuberant mode, dips are likely to be bought into. Volatility is inevitable and, therefore, safety is in large-caps, Vijayakumar added.

Gainers & losers

Top gainers & losers on the Sensex.

Sectoral strand

All sectoral indices on the NSE were trading in the red. Nifty Metal plunged 2.94%, followed by Nifty Bank & Nifty Realty slipped around 1.58% each. While Nifty Auto, Nifty IT, Nifty FMCG and Nifty Pharma indices lost anywhere between 0.70-1.20%.

Broader market

Pain in the broader markets was much larger compared to benchmark indices. The BSE MidCap index declined 1.20% at 22,843 level and the BSE SmallCap index was quoting at 25,986 up by 0.96%.

Bears were in charge of the markets as 1,766 shares declined compared to 558 advanced and 101 remained unchanged.

Global markets

Overseas, Asian stocks fell Friday as the fast-spreading delta virus strain stoked concerns about economic growth and China’s regulatory curbs sapped sentiment.

China’s one-year loan prime rate (LPR) and five-year LPR were both left unchanged at 3.85% and 4.65%, respectively, on Friday.

US Stock markets ended mixed on Thursday as gains in technology shares were countered by selling in cyclical sectors.

The number of people seeking unemployment benefits fell last week for a fourth straight time to a pandemic low. The Labor Department reported Thursday that jobless claims fell by 29,000 to 348,000.