Business | Markets
Sensex slips ahead of US rate meeting
Indian shares dropped 1.8 per cent yesterday as nervousness ahead of a US interest rate decision pulled down global equity markets, and today's expiry of monthly derivatives contracts also weighed.
- Reuters
- Published: 01:28 January 31, 2008
Mumbai: Indian shares dropped 1.8 per cent yesterday as nervousness ahead of a US interest rate decision pulled down global equity markets, and today's expiry of monthly derivatives contracts also weighed.
The US Federal Reserve is widely expected to announce its second interest rate cut in just over a week on Wednesday, but market confidence in an aggressive 50 basis point drop was waning.
The benchmark BSE 30-share index closed down 1.84 per cent, or 333.3 points, at 17,758.64, with 21 components falling.
The index had opened 0.16 per cent higher, but lost ground as other Asian and then European markets turned negative.
"Fed meeting is currently the most important event... People are scared what they will come out with," said Gajendra Nagpal, chief executive at Unicon Financial in New Delhi. "If the Fed cuts rates by less than 50 basis points or doesn't cut rates, markets will fall sharply tomorrow and investors won't be able to cover positions. So there is some worry on that front."
India's central bank on Tuesday left key rates steady, disappointing investors, who had been expecting a cut.
The BSE index has lost more than 12 per cent this year and is more than 16 per cent below its record high of 21,206.77 hit on January 10.
Brokerage JM Financial Services said technicals pointed to "substantial weakness" in the next few days, with the index having the potential to fall to a 17,000-17,300 support zone.
"Overall, with fresh bearish signals generated, the indices look set for a sizable correction in the next few days,cent it said.
Foreign funds
Selling by foreign funds has aggravated the fall in the markets. Overseas funds dumped $375.2 million worth of Indian shares on Monday, taking their net withdrawals to $3.8 billion in nine sessions.
They had pumped in a record $17.4 billion in Indian markets last year.
Reliance Industries fell 4.1 per cent to Rs2,469.60, while most-valuable lender ICICI Bank lost 2.9 per cent. Leading explorer Oil & Natural Gas Corp slid 4.9 per cent.
No 2 motorcycle maker Bajaj Auto fell 4.6 per cent to Rs2,268.80, after the firm missed forecasts with a five per cent fall in December quarter profit on sluggish sales.
But leading mobile operator Bharti closed 0.2 per cent higher at Rs852.30, paring gains from a nearly three per cent rise, after it reported a forecast-beating 41.7 per cent rise in quarterly profit on a surge in subscriber numbers.
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