Market dips amid Russia-Ukraine tensions and Fed rate cut uncertainty
NEW DELHI: The Indian equity markets witnessed a sharp sell-off on Thursday, with the benchmark indices BSE Sensex and NSE Nifty 50 declining by approximately 1.5% each. The drop was primarily driven by heavy selling in IT stocks amid uncertainty over US interest rate cuts and escalating geopolitical tensions following Russia’s renewed attacks on Ukraine’s energy infrastructure.
The Sensex plunged 1,190.34 points, or 1.48 percent, to close at 79,043.74, while the Nifty dropped 360.70 points, or 1.49 percent, to settle at 23,914.20.
“Domestic markets cooled off after a strong start earlier this week. The overnight sell-off in the US, spurred by uncertainties over the Federal Reserve’s rate-cut trajectory and rising geopolitical tensions, triggered a correction in IT and consumer discretionary stocks,” said Vinod Nair, Head of Research at Geojit Financial Services.
Inflation in the US rose by 2.3 percent year-on-year in October, driven by higher service prices. This has dampened expectations of a rate cut in December, as investors fear the Federal Reserve might adopt a cautious approach.
The Nifty IT index dropped 2.4 percent, with major stock Infosys declining by over 3 percent. Other IT heavyweights, including TCS, Wipro, HCL Technologies, and Tech Mahindra, fell between 1.5 percent and 2.5 percent. Analysts noted that Indian IT companies’ substantial exposure to the US makes them highly sensitive to economic developments in the world’s largest economy.
Manish Bhandari, CEO and Portfolio Manager at Vallum Capital Advisors, commented, “The market is factoring in solid growth but persistent inflation, which could delay the Federal Reserve’s rate cuts despite prior signals. However, the recent cooling of bond yields by 85 basis points over three days suggests optimism that inflation may ease in the near term.”
Bhandari remained positive on the IT sector, highlighting its prospects amidst a US manufacturing resurgence and opportunities for Indian IT firms to capitalize on this growth.
The broader market also faced challenges. The Nifty Auto index declined by 1.7 percent, while the Nifty Financial Services and Nifty Private Bank indices each slipped 1 percent. On the other hand, the Nifty Smallcap 100 and Nifty Midcap 100 indices closed with minor gains, reflecting investor interest in undervalued stocks.
“The broader market outperformed the frontline indices as foreign institutional investors (FIIs) and domestic investors shifted focus to undervalued opportunities,” added Nair.
