Dalal Street on Friday (December 17, 2021) saw broad based selling with all the sectoral indices trading with a deep cut. The only pack resilient had been the IT sector which got a boost after Accenture's robust first quarter earnings and guidance upgrade for the second quarter.
At the time of writing this copy at around 1:49 pm, Nifty was dragged lower by 173 points or 1%, while it hit day's low of 16,984.3. Nifty Bank and the broader markets however underperformed the headline indices.
So, here are the probable factors weighing on the Indian stock markets today:
1. Hawkish stance of major central banks being absorbed by emerging markets including India:
After the Fed meeting concluded on Wednesday, its monetary statement provided that it shall end its quantitative easing offered in the backdrop of the Covid outbreak by March 2022. Also, interest rates held near zero to boost economic growth will have to be reversed to tackle the demon of inflation. Likewise, it is hinted that through the CY 2022 there shall be made three interest rate hikes of 25 basis points each.
The ECB also came up with a similar stance to reduce its bond purchases, nonetheless it committed to extend monetary policy support for the Euro zone economy into the next year. However, the UK central bank became the first central bank of an advanced economy to hike policy rates ever since Covid struck.
This liquidity tightening will result in efflux of foreign funds from the emerging markets including India.
2. Broad based sell-off:
No sector has been spared in today's sell-off, with major drag coming on indices including media, PSU Bank, Realty of over 2 percent. Other notable losers have been auto, oil and gas, private bank and financial services stocks among others. IndusInd Bank, Tata Motors, Kotak Mahindra, ONGC and HUL lead the list of losers on the Nifty.
Broder markets underperformed too with a plunge of 2 percent each on the Nifty mid cap 100 and Nifty small index, respectively.
3. Unabated FII selling:
Net outflow by FIIs in the cash market as of December 16, 2021 stood at Rs. 1468 crore. So far during the ongoing month, FIIs have sold into Indian equity worth more than Rs. 24,600 crore, the highest in any month this year.
4. Global markets:
Most Asian markets in trade today tumbled by over 1 percent, with Nikkei losing as much as 1.79%. Geopolitical tensions due to the US sanctions on China over human rights issues also dragged the Shanghai Composite by over 1 percent.
5. Omicron worries:
The rapid spread of the new Covid variant is again unnerving investors as the economic growth can again see a hit in the backdrop of imposed curbs. In the US, the spread of the new variant has influenced companies to reverse their plans of calling back employees back to office. Experts are of the view that this new strain is spreading 70% faster in comparison to previous strains, nonetheless the impact is less severe.