Minutes of the Federal Open Market Committee’s December 14-15 meeting suggested the US central bank may raise interest rates sooner than expected, adding to mounting concerns over the latest variant of the Coronavirus.
Indian stock indices plunged on Thursday, snapping a four-day winning streak, as concern over a surge in cases of COVID-19’s Omicron variant coupled with the US Federal Reserve’s hawkish stance on interest rates brought the bears back to the market.
At close, Sensex was down 621.31 points or 1.03 percent at 59601.84, and the Nifty fell 179.40 points or 1 percent at 17745.90.
All sectoral indices barring oil & gas and auto ended in the red with IT and realty index closing over 1 percent lower. The BSE midcap and smallcap indices ended flat.
Here are the factors dragging the markets lower:
International markets came under selling pressure and closed in the red after minutes of the Federal Open Market Committee’s December 14-15 meeting suggested the US central bank may raise interest rates sooner than expected.
The Dow Jones Industrial Average fell 392.54 points, or 1.07%, to 36,407.11, the S&P 500 lost 92.96 points, or 1.94%, to 4,700.58 and the Nasdaq Composite dropped 522.54 points, or 3.34%, to 15,100.17.
Asian Markets also declined with Toky’s Nikkei 225 slipping 1.56%.
Surging Omicron cases
India has logged 90,928 new COVID cases in the last 24 hours, and the daily positivity rate is 4.18 percent, the health ministry said on Thursday. As cases surge, many states have implemented stricter rules and restricted unnecessary travel.
The markets were spooked anew by concerns of another lockdown that may hurt economic growth.
Hawkish Fed
A “very tight” job market and unabated inflation may require the Federal Reserve to raise interest rates sooner than expected and begin reducing its overall asset holdings, U.S. central bank policymakers said in the minutes of their meeting last month.
Fed officials were uniformly concerned about the pace of price increases that looks likely to persist, alongside global supply bottlenecks, “well into” 2022.
All Sectoral Indices in the Red
All sectoral indices barring oil & gas and auto ended in the red with IT and realty index closing over 1 percent lower. The BSE midcap and smallcap indices ended flat. JSW Steel, Tech Mahindra, UltraTech Cement and Reliance Industries were the top losers, shedding over 2 percent each.
Technical Views
Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas
Nifty witnessed profit booking on January 06 after having run up for the last four consecutive sessions. It had reached near 18000 mark, which was a key barrier & thereon the bulls took a pause for a breather. As a result of the recent rally, the hourly momentum indicators had reached the overbought zone & with the current minor degree dip, they are getting an opportunity to cool off. Also, the hourly chart shows that the lower end of a rising channel is acting as a support for the minor degree dip.
The junction of 40 HEMA & the hourly lower Bollinger Band is also present below the lower channel line. Thus 17650-17600 is a key support zone where the Nifty can form a short term base for itself. The overall structure shows that the index can witness sideways action over the next few sessions post which it will be set to head higher.
Mohit Nigam, Head – PMS, Hem Securities
Indian equity markets trimmed some of their losses in the late afternoon session. The broader indices, the BSE Mid cap index and small cap index were also trading with losses, while India VIX climbed 2% higher. Losses across most sectors, led by financial, IT and oil & gas shares, pulled the benchmark indices lower. Concerns about the increasing cases of the Omicron variant of COVID-19 persisted among investors globally. Besides, as COVID-19 infections spike in the country resulting in restrictions in various states and impacting the fragile recovery, many economists are expecting RBI to delay the policy normalization move, which is expected in the February review.
On technical front, Nifty’s immediate support and resistance can be 17,500 and 18,000 respectively. While for Bank Nifty 36600 and 38000 may act as immediate support and resistance respectively.
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