Sensex dives 1,021 pts on foreign investor flight, weaker currency

Mumbai: Weak global cues pulled the sensex down by 1,021 points on Friday with banking, financial stocks apart from market heavyweight RIL leading the slide. The rupee, as it fell to a record intraday low, also weighed on investor sentiment, market players said.
The rate hike by the US Fed on Wednesday followed by a commitment that it was ready to sacrifice growth in favour of a lower inflation sent global investors into risk-off mode.As a result, foreign funds are taking money off emerging markets, while uncertainty from the war in Ukraine is adding to investors’ nervousness.
After opening marginally lower and treading in positive territory briefly on Friday, the sensex witnessed strong selling as global market rout continued. After dipping to an intraday low at 57,982 points, the index finally closed at 58,099, down 1.7%.
“Equity markets traded lower mainly tracking the developments in overseas markets, especially the US,” said Joseph Thomas of Emkay Wealth Management. “The Fed rate hike and the stance that hikes would continue till inflation is contained displayed in ample measure an aggressive and hawkish Fed.”
In addition to a 75bps hike, the US central bank also projected lower growth and gradually rising unemployment in the world’s largest economy which added to investors’ worries globally, Thomas said. “High inflation, widening trade deficit, weakening currencies and a likely slowdown in growth may entrap some of the emerging market economies. The RBI policy is expected in the next few days, and the anchoring will be keenly watched to see its implications for the market at a time when the economy is witnessing high credit growth and a shortfall of money market liquidity.”
Meanwhile, oil was headed for the longest stretch of weekly losses this year. WTI crude dropped below $80 a barrel on Friday for the first time since January. On Friday, foreign funds were aggressive sellers with a net outflow of Rs 2,900 crore. Domestic institutions, however, were buyers, recording a net inflow of Rs 299 crore, BSE data showed. The day’s selloff also wiped out nearly Rs 5 lakh crore worth of investors’ wealth with BSE’s market capitalisation now at Rs 279.6 lakh crore, data showed.