Sensex Plummets 300 Points as Fed's Hawkish Stance and IT Selling Force Markets into the Red

Sensex Plummets 300 Points as Fed's Hawkish Stance and IT Selling Force Markets into the Red​

The Indian stock market saw a sharp correction on Thursday as benchmark indices erased earlier gains, moving into negative territory. The decline was driven primarily by persistent selling pressure in information technology (IT) stocks and a hawkish message from the US Federal Reserve regarding future interest rate movements.

By noon, the Sensex fell 137.77 points or 0.18 percent to 77,017.84, which was approximately 300 points lower from its day's high. Simultaneously, the Nifty declined 34.25 points or 0.14 percent, closing at 24,051.45.

Profit Booking and Sectoral Weakness Drive Correction​

The market turnaround was attributed to profit booking across several key sectors following a strong run-up in recent trading sessions. The BSE benchmark had surged significantly, rising by 3,323.07 points or 4.5 percent over the previous four days. Nifty also showed considerable strength, gaining 924.1 points or 3.98 percent in the same period.

Sectors experiencing significant selling pressure included auto, metal, realty, consumer durables, and oil & gas. This sharp rally, which underpinned early gains, was countered by increased profit-taking at higher valuations across these segments.

US Federal Reserve Stance Dampens Global Appetite for Emerging Markets​

A major factor influencing the market decline was the signal from the US Federal Reserve regarding future interest rates. While the Fed maintained its current interest rates, it indicated that at least one quarter-point hike could occur later in the year.

This hawkish stance is particularly impactful for Indian IT companies, as these firms derive a significant portion of their revenue from the American market. Higher U.S. interest rates typically reduce the appeal of emerging markets like India for foreign investors.

Tech Stocks Under Pressure Due to Global Spending Outlook​

Shares in major Indian IT corporations came under pressure due to concerns about global spending conditions. Companies such as Infosys, HCL Technologies, Tata Consultancy Services (TCS), Tech Mahindra, and Wipro were among the top decliners on the Nifty 50 index.

Industry experts pointed out that this shift reflects nervousness over the overseas economic outlook. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the dot plot suggests a potential rate hike as early as October. This assessment was supported by the US 10-year bond yield climbing to 4.46 per cent.

Global Cues and Rupee Depreciation Compound Market Weakness​

The broader global market sentiment also contributed to the selling pressure in India. Asian markets were reportedly weak, with both Shanghai's SSE Composite and Hong Kong's Hang Seng trading in negative territory. US markets had also ended on a downswing on Wednesday.

Adding to these headwinds was the depreciation of the rupee against the US dollar. Amid the Fed's hawkish message and the strengthening American currency, the rupee fell 21 paise, reaching 94.71 against the USD. The dollar index rose to 100.23, marking its highest level in four months.