The rupee too steeply lowered by 40 paise to 67.83 against the dollar.
A sense of nervousness gripped stocks on Thursday as the Sensex dropped 84 points to close at 26,519 trying to figure out the impact of US interest rate hike on India and other emerging markets amid feelers that more are on the cards. This sent the rupee steeply lower by 40 paise to 67.83 against the dollar, which fed the nervous cycle. The session saw strong spells of volatility amid sustained foreign funds outflows.
The quarter percentage point rate increase -- the first this year -- was a virtual certainty although investors were caught off-guard after the Federal Reserve indicated that the pace of the tightening will be quicker in 2017. The 30-share barometer started on a negative note, fell further but somewhat recovered to end at 26,519.07, down 83.77 points, or 0.31%. It moved between a low of 26,407.58 and a high of 26,737.86. The gauge had lost 95 points in the previous session. The NSE Nifty fell 28.85 points, or 0.35%, at 8,153.60. Intra-day, it hovered between 8,121.95 and 8,225.90.
"The Fed rate hike was in the ballpark, but the outlook is hawkish with three hikes in 2017 against previous estimate of two, which has put pressure on domestic market and rupee," said Vinod Nair, Head of Research, Geojit BNP Paribas Financial Services. "The US bond yield and the dollar strengthened post the announcement, which is negative for emerging markets, including India, as the risk of outflows goes up." The indices contained the losses on the back of buying in IT stocks supported by a strong dollar against the rupee. Sentiment took a hit as fears grew that a rate hike in the US would mean higher pace of capital outflows from emerging markets, including India, into US bonds that are considered as a safer investment option.
Major losers that dragged down the indices included Sun Pharma, NTPC, Tata Motors, ITC, Bharti Airtel and Cipla, falling by up to 4.36%. But TCS, the country's leading IT exporter, continued its upward journey for yet another day and ended 2.34% higher on expectations that a rising dollar will improve its earnings. Gitanjali Gems climbed 6.70% after its September quarter net profit jumped 48% and the IPO notification. Global markets ruled mixed after the US Fed, as expected, hiked rates by 0.25%. In Asia, Hong Kong's Hang Seng fell 1.77% and Shanghai Composite shed 0.73% while Japan's Nikkei was up 0.10%.
London's FTSE dropped 0.07%. Paris rose 0.70% while Frankfurt's DAX 30 rose 0.53%. The BSE healthcare index suffered the most by falling 1.36%, followed by FMCG 0.80%, consumer durables 0.79% and auto 0.32%. In sync with the trend, the small-cap index rose 0.21% and mid-cap ended almost flat. Foreign investors sold shares worth Rs 632.29 crore yesterday, showed provisional data. "Concerns are widespread that higher rates in the US will attract foreign investments from emerging markets to the US," said Karthikraj Lakshmanan, Senior Fund Manager Equities, BNP Paribas Mutual Fund. Out of 30-share Sensex constituents, 18 ended lower, while 12 finished in the green. The market breadth turned positive as 1,315 stocks ended higher, 1,290 closed lower while 173 ruled flat. The total turnover on BSE came in at Rs 2,582.33 crore, higher than Rs 2,383.04 crore registered during the previous trading session.
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