$138 billion, or Rs7.52 lakh crore.
That’s how much the US Federal Reserve took away from global market capitalisation on Thursday after the minutes of its January 30 meeting, released Wednesday, raised doubts about the continuation of its open-ended quantitative easing (QE3) programme.
Indian markets dropped the most in more than nine months as investors across the world sold off equities and commodities.
The benchmark Sensex, which opened on a weak note following negative cues from Asian markets, crashed 1.62% or 317.39 points – the biggest daily loss in absolute points term since May 8, 2012, when the index had lost 366.53 points.
The Nifty too lost 90.80 points to end the day at 5852.25.
Gopal Agrawal, CIO at Mirae Asset Global Investment, believes the Fed minutes have resulted in a risk-off environment.
“Commodities have seen a sell-off in the last two days after the Chinese government sold bonds for the first time in seven months to suck out liquidity. Also, Fed’s meeting minutes have raised some doubts regarding tightening,” he said.
Asian markets fell 1.5-3%, led by Shanghai Composite, which tanked 2.97%. Major European indices, too, were trading around 1.5% lower on Thursday.
Saurabh Mukherjea, head of institutional equities at Ambit Capital, believes the global sell-off on Thursday was an overreaction, given that Fed has simply hinted that QE3 won’t be endless.
“People seem to have misinterpreted the Fed minutes. The Fed is simply trying to give markets a reality check that it won’t be an endless game, but has not indicated that it would be stopping the QE3 any time soon. I don’t think there is any reversal in global market trends,” he said.
Domestic institutions, which have net sold Rs25,000 crore of equities so far this year, were again net sellers of shares worth Rs229 crore on Thursday.
FII figures were positive at Rs1,213 crore, though they too sold big in the cash market, mostly in shares of Shriram Transport Finance.
All the indices on BSE, barring consumer durables, closed the day in the red with high-beta sectors like metals, banks and real estate losing 2.5-3%. The breadth was quite negative with 29 out of 30 Sensex stocks declining.
With credit growth data released by the Reserve Bank of India on Wednesday coming in weak and the quarterly results disappointing, the budget will decide the trend for local markets in coming days, believe experts.
The markets will need “credible policy actions and implementations on ground” to move forward, said Agrawal.
Mukherjea believes the budget will surprise positively and set the tone for the markets in the medium term.
Follow Nitin Shrivastava @nitinpshri