Research Icon: Sensex tanks 500 pts on FPI worries, Fed U-turn on rate cut prospects
NEW DELHI: Benchmark equity indices took a beating on Friday led by a sharp drop in banking and NBFC stocks, a day after ADB lowered India's growth forecast for this financial year to 7 per cent.
The market had a strong start to the day amid strong global cues after signal from a Fed official that the US central bank was on course to cut rate this month-end. Sensex had risen 130 points and Nifty topped the 11,600 mark in opening trade. But the market took a U-turn by midday and slipped ..deep into the red. BSE benchmark Sensex and NSE's Nifty each traded 1 per cent lower at 1300 hours on Friday. The advance-decline ratio on BSE stood at 1:3, indicating that for everyone stock that rose, three declined.
Going by the buzz on Dalal Street, here are four key factors hurting market sentiment:
FPI concerns: Thursday was the 13th straight session when foreign portfolio investors cut exposure to domestic stock. In fact, Thursday’s selloff at Rs 1,405 .. crore was worst since the Rs 1,449 crore FII outflow recorded on June 6, NSE data showed. Finance minister Nirmala Sitharaman on Thursday stuck to her Budget proposal and declined to relent to demands by FPIs structured as trusts that they be exempted from the higher income-tax surcharge. She said they should adopt a corporate structure to avoid the levy. She said the government believed the richest should contribute more to society and nation building.
Selloff in financial, other rate sensitive stocks: Among the top seven contributors to the Sensex fall in terms of points, five were from financial sectors. Bajaj Finance plunged 5 per cent, IndusInd Bank 3 per cent, SBI 1.7 per cent, HDFC 1.6 per cent and Kotak Mahindra Bank 1 per cent. Auto stocks also took a beating, with M&M, Tata Motors, Hero MotoCorp and Bajaj Auto falling up to 3 per cent.
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