Indian benchmark indices ended over 1% lower yesterday as stock markets around the world are under selling pressure.
The benchmark Sensex index fell 1.18%, or 407.40 points, to 34,005.76.
So far this year, it has fallen 1%. The NSE Nifty settled 107 points lower.
Outshining the benchmark index, MidCap was down only 0.09%, while SmallCap gained 0.23%. Among BSE sectoral indices, bankex, finance, teck, IT and telecom suffered losses, while metal, realty and power posted gains.
US stocks plunged around 4% on Thursday in another dramatic session. “After an extremely calm and stable market for a year or so, volatility is back and this healthy correction was much needed,” said Navneet Munot, chief investment officer at Mumbai- based SBI Funds Management.
Locally the focus continues to be on how soon and how much the Indian economy and company profits recover, he said.
Earnings of the 50 Nifty members for the last three months of 2017 are expected to rise 29 % from a year earlier,faster than the 16 % in the previous quarter, according to data compiled by Bloomberg.
Net income at 20 of the 40 Nifty companies that have reported so far have trailed analyst estimates.
The Sensex is trading at nearly 23 times its reported earnings, and the price-to-earnings ratio of S&P BSE MidCap Index is at 48.“Mid- and small-sized companies may bear most of the brunt in case of a selloff in equities as they have run up more over the last few years,” Munot said.
The S&P 500 slumped 3.8% on Thursday, while the Dow Jones dropped 4.2% as losses accelerated late in the trading day.
Meanwhile the rupee yesterday weakened to a fresh two-month low against US dollar after fears of higher interest rates by the US Federal Reserve led to a fresh plunge in global markets.
The rupee ended at 64.40, down 0.22% from its Thursday’s close of 64.26.
The rupee opened at 64.42 a dollar and touched a low of 64.43, a level last seen on December 18.
So far this year, the rupee has fallen 0.8%, while foreign investors bought $1.48bn and $2.06bn in local equity and debt markets, respectively.
Traders were cautious after 10-year US bond yield climbed to almost 2.9%, a key indicator of inflationary pressure and the likelihood of higher interest rates.
Analysts expect that it could hit 3% in the coming days.
Global markets started falling this week after strong US jobs data grew at a fast rate in January.
It is good for the economy, analysts believe, but worry that it may hurt corporate profits and that rising wages are a sign of faster inflation which may prompt the Federal Reserve to raise interest rates at a faster pace.
Also, strong signals from the Bank of England that an interest rate increase was on the way added to expectations that the world’s major central banks were now firmly on course to wind down the emergency stimulus.
Bond yield rose ahead of the key consumer price inflation and Index of industrial production data due on Monday.
According to Bloomberg analyst estimates, Index of industrial production will be at 6.1% in December from 8.4% a month ago.
The government will also issue wholesale price inflation data on February 14.
According to Bloomberg analyst estimates, WPI will be at 3.2% in January from 3.58% in December.
The 10-year bond yield ended at 7.49% compared to its previous close of 7.47%. Bond yields and prices move in opposite directions.
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