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Janet jitters for stocks

Mumbai, March 20: Federal Reserve chief Janet Yellen roiled both global and Indian stock markets on Thursday with her comment yesterday that interest rates in the US would rise in Spring next year.

Global markets were particularly spooked by her statement that the timing of the Fed’s decision to pull the rate trigger would not be linked to the unemployment level dropping below a previously announced target of 6.5 per cent.

In India, the observation by Yellen led to fears that dollar inflows into the country would be hit, resulting in the benchmark S&P BSE Sensex dropping nearly 93 points to close at 21740.09 — the lowest close since 21513.87 on March 6.

The 50-share CNX Nifty of the NSE also dipped 40.95 points, or 0.63 per cent, to end below the 6500-mark at 6483.10. This is also its weakest since 6401.15 on March 6.

Yellen’s comments came after a meeting of the Federal Open Markets Committee on Wednesday to reduce the monthly asset purchases by another $10 billion to $55 billion per month.

While this was on expected lines, the markets were in for a nasty surprise at a news conference following the meeting where Yellen said the time-frame for raising interest rates could be on the order of around six months after the bond purchases end. This statement spooked global markets as many were expecting that interest rates would be raised in the US in the later part of 2015.

Key benchmark indices in Hong Kong, China, Taiwan, Singapore, South Korea and Japan today ended down between 0.77 per cent and 1.79 per cent. Elsewhere, in Europe, France’s CAC was down 0.62 per cent, Germany’s DAX 0.52 per cent and the UK’s FTSE 0.72 per cent.

While the Sensex began modestly lower at 21797.61 and hit a high of 21853.25 in noon trades, pressures soon started building on stocks after Europe opened weaker.

The index later hit a day’s low of 21704.66 and closed with a loss of 92.77 points. The lower close comes at a time the domestic markets are in the midst of a pre-election rally.

 
 
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