Markets fall further, Sensex dips 200 points as Fed cuts stimulus

The Indian equity markets continued to fall further in mid-morning trade,marking their lowest intraday level since November 27 on risk-off mood in emerging markets.

Strains in emerging markets returned with a vengeance and the US.Federal Reserve further scaled back its stimulus, sending investors scurrying to safety in bonds and yen. The Bank Nifty fell as much as 2 percent to its lowest since October, heading towards a sixth consecutive losing session.

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At 11:55 am, the BSE Sensex was down 200 points at 20445, while the Nifty was down 62 points at 6057. Even the rupee was trading lower at 62.72 against the US dollar in line with weakness seen in other emerging market currencies.

According to John Woods, MD and Chief Investment Strategist, APAC, Citi, the Indian equity markets could head to August lows if the pressure on emerging marketscontinue.

“Investors should brace up for correction as this crisis unfolds,” he told CNBC-TV18 in an interview.

He sees the Sensex finding support at 18,000 levels

Sesa Sterlite, BHEL, Tata Steel, Hero Motocorp and Hindalco are top losers in the Sensex. Led by good results, Bharti Airtel is still leading the gainers, followed by GAIL, Tata Motors and M&M.

ICICI Bank slumped 2.3 percent, and HDFC Bank fell 1.2 percent. Titan was down nearly 1 percent after the company’s December-quarter earnings lagged some analysts estimates, dealers say.

Hero MotoCorp fell1.3 percent on caution ahead of its quarterly earnings later in the day. The bikemaker’s operating profit may lag consensus estimates.

On expected lines, the Federal Reserve decided to cut its bond purchases by another $10 billion. Investors were expecting some comment on the recent crisis in emerging market but not a word was mentioned on the same.

Speculation was that the Fed could put on hold its tapering given the emerging market jitters.But the US Central Bank signalled that it is likely to keep reducing its purchases in the coming months, citing a pickup in economic activity and improvement in the labor market.

The Dow fell 190 points. The S&P 500 and the Nasdaq both fell more than 1%. Asian markets are bleeding. Japan’s Nikkei is down over 3% while Hong Kong’s Hang Seng has lost over 1.5%.

Meanwhile, US investors were hoping the Fed would make some mention about the recent issues regarding the weakening currencies of emerging markets.

RBI governor Raghuram Rajan meanwhile said the repo rate hike was aimed at lowering inflationary pressures.

With inputs from Reuters