Shares fall on stimulus worries

Indian shares slipped on Thursday, falling for a seventh session out of eight, as blue chips such as ICICI Bank declined after the US Federal Reserve announced the start of its tapering, raising concerns about foreign selling.

By Abhishek Vishnoi (Reuters)

Published: Fri 20 Dec 2013, 10:39 PM

Last updated: Sat 4 Apr 2015, 7:51 AM

Overseas investors are net buyers of more than $18 billion worth of shares so far this year, the biggest in emerging Asia, according to Deutsche Bank data earlier this month, which also makes the country vulnerable to potential selling.

Investors say the prospect of rate hikes from the Reserve Bank of India could also weigh on shares, despite the relief rally on Wednesday after the central bank surprised investors by keeping monetary policy on hold.

Indian shares have thus steadily retreated from record highs hit on December 9, with the BSE index 3.7 per cent away from an all-time high of 21,483.94 points.

“One of the big questions post Fed’s move is whether liquidity will continue flowing to emerging markets like India or not. If rates go up in US then it will be risk for EMs,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.

The benchmark BSE index fell 0.73 per cent, or 151.24 points, to end at 20,708.62.

The broader NSE index declined 0.81 per cent, or 50.50 points, to end at 6,166.65, closing below the psychologically important 6,200 level.

However, NSE’s volatility index, or the domestic equivalent of the VIX fear gauge, marked its lowest level since May 7 intraday after the RBI and Fed’s moves pointing towards some bets on stability in the markets soon.

Rupee fell 0.6 per cent to 62.1175 per US dollar.

Among blue chips, rate sensitive stocks especially banks led the fall on possible risk aversion on US Federal Reserve tapering and potential hike in interest rates in the near term if inflation fails to cool down.

In private banks, ICICI Bank Ltd fell three per cent, HDFC Bank Ltd ended 2.1 per cent lower, while Kotak Mahindra Bank lost 3.8 per cent.

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