Stocks drop as US rate hike fear spooks investors

The benchmark BSE Sensex dropped 162.35 points or 0.47 per cent and the broader Nifty settled below the 10,500 mark as investors were spooked by worries about US Fed rate hike and weak economic data.

The Sensex resumed lower at 34,156,63 and dropped further to a low 34,076.45 due to heavy selling pressure in view of foreign capital outflows and lower global cues. It closed at 34,184.04, a loss of 162.354 points, or 0.47 per cent.

The broader Nifty dipped below the key 10,500-level to touch a low of 10,461.55 and finally concluded 61.45 points, 0.58 per cent down at 10,492.85.

“Weak global market on account of Fed's hawkish view on future rate hike and extension of selling in banks continued to impact the market. FIIs are sellers in the market due to domestic headwinds and is adding pressure on INR,” Vinod Nair, Head of Research, Geojit Financial Services said.

Nifty is consolidating near the recent low while 10-year yield is still floating at higher levels keeping investors cautious, Nair said.

Banking stocks led by Axis Bank, Yes Bank, ICICI Bank and HDFC Bank took a hit after the Finance Ministry set a 15-day deadline for banks to take pre-emptive action on operational and technical risks, following a $2 billion fraud at Punjab National Bank.

In addition, sustained capital outflows and the rupee continued to trade at 3-month low of 65.31 against the US dollar, down 44 paise during the day, weighed on sentiments.

Investors turned cautious ahead of the macroeconomic data, brokers said. The December quarter GDP growth numbers were set for release later in the day.

Market sentiment suffered a jolt after other Asian markets closed with widespread losses and European markets dropped in early trade, tracking a slump in the US stocks overnight after the US Fed chair revived worries about a sharp increase in interest rates.

A declining Chinese factory activity, which slowed to a 19-month low in February, also hit the market sentiment.

Fresh spell of selling dragged down most of the sectoral indices, led by metal, banking and FMCG, capital goods, power and infrastructure ended in the negative zone, falling up to 1.21 per cent.

PNB shares hit a 20-month low by slumping 12.11 per cent in morning trade but managed to close higher by 3.05 per cent. Gitanjali Gems too cracked nearly 5 per cent.

Among the Sensex components, ICICI Bank fell 1.92 per cent, followed by Axis Bank 1.47 per cent, Yes Bank 1.47 and HDFC Bank 1.27 per cent. Other banking stocks like Federal Bank, Kotak Mahindra Bank, IndusInd Bank ended lower by up to 1.67 per cent.