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Markets slide as Fed begins tapering

Last updated on: December 19, 2013 16:18 IST
The Bombay Stock Exchange.

Benchmark shares indices ended lower amid fears that foreign institutional investor would reduce their allocations to emerging markets, including India thereby hurting incremental inflows after the US Federal Reserve Bank announced gradual reduction in its monetary stimulus measures.

The 30-share Sensex ended down 151 points at 20,709 and the 50-share Nifty ended down 51 points at 6,167.

The US Federal Reserve Bank on Wednesday said it would reduce its monthly purchase of asset by $10 billion, reducing it down to $75 billion. The taper will be equally split between mortgage-backed securities and US teasury bonds.

The rupee has come off its day's lows on the back of dollar sales from PSU and foreign banks. The rupee is currently at 62.17 compared to its close of 62.09 on Wednesday. Meanwhile, currency dealers said the impact of the Federal Reserve plans to reduce its monetary stimulus measures by $10 billion has been largely priced in.

Asian markets ended mixed with Japan's benchmark index Nikkei leading the gains. The Nikkei ended up 1.7% amid a weakening yen following the US Fed's annoucement to start reducing its bond-buying programme. Hang Seng and Shanghai Composite ended down 1% each while Straits Times ended up 0.3%

European markets extended gains after the US Fed signalled that low interest rates would prevail even as the US central bank announced reduction in its bond-buying program. CAC-40, DAX and FTSE-100 were up 0.9-1.5% each.

Bankex was the top loser among the sectoral indices on the BSE down 2.5% followed by Capital Goods, Consumer Durables, Oil and Gas among others. However, IT and Healthcare indices were among the top gainers up 1.2-1.9% each.

Bank shares shed most of yesterday's gains after the RBI maintained status quo on key policy rates. ICICI Bank, HDFC, HDFC Bank and SBI ended down 2-3% each contributing the most to the Sensex decline.

In the capital goods space, L&T ended down 3% and BHEL fell 0.7% on profit taking after recent gains.

Other Sensex losers include, ITC and ONGC among others.

IT majors were among the top gainers on signs of improving business environment in the US. Most of the IT majors earn a major portion of their revenues from exports to the US. The BSE IT index hit a record high of 8974 in intra-day trade. Infosys, Wipro and TCS ended up 1.3-1.6% each.

Other gainers include, Maruti Suzuki, Sun Pharma, Sesa Sterlite and Cipla among others.

Among other shares, Wockhardt has moved 10% up to end Rs 417 after the pharmaceutical firm said that its Swiss arm will list on the Berne Stock Exchange in Switzerland today, 19 December 2013.

Lupin ended higher by 2% at Rs 909, extending its previous day’s 1.3% gain after the company said it has launched the generic version of ViiV Healthcare's (ViiV) Trizivir tablets in the US market with 180-days of marketing exclusivity.

Power Grid Corporation of India (PGCIL) ended down 1% at Rs 99 on back of heavy volumes after fresh shares of 602 million allotted in follow-on-public offer (FPO) starts trading today.

SKS Microfinance ended higher at Rs 177 after the company announced the third microfinance securitization during the current financial year of Rs 215 crore.

In the broader market, the BSE Mid-cap and Small-cap indices ended marginally down.

Market breadth ended weak with 1,283losers and 1,133 gainers on the BSE.