Mumbai, Feb. 21: Fears over the US reversing its easy monetary regime gripped stocks across the world, including in India where the bellwether Sensex of the Bombay Stock Exchange sank over 317 points — its steepest fall in almost nine months.
The Sensex closed at 19325.36 — which was also its lowest in 2013. The NSE Nifty fell below 5900 to close at a two-month low of 5852.25, down 90.80 points.
The apprehensions arose after the minutes of the US Federal Reserve’s (Fed) policy meeting held in January were released on Wednesday.
The minutes showed some officials expressing fears that if the Fed was to continue buying bonds and treasuries (it buys around $85 billion per month), it could stoke inflation.
Though the Fed decided to continue with its bond buying programme, it said that these purchases would go on till the job market improved.
“The minutes of the last Fed meeting have raised concerns that the Fed may withdraw the monetary stimulus if there is some improvement in the economic data. This has raised concerns about fund flows across asset classes, including emerging markets.
“Indian markets have received substantial FII money over the past few months and any reversal of the same may make markets vulnerable, if matching flows do not come from the domestic participants,” Dipen Shah, head of PCG (Private Client Group) research, Kotak Securities, said.
Brokers said stock prices came under pressure from the beginning of trade, and the key indices showed no attempts at any turnaround.
While US Dow Jones index closed 0.8 per cent down last night, losses at Nasdaq were sharper at 1.55 per cent.
On Thursday, stocks dipped at the opening of trade on Wall Street, as data continued to show a slowly improving economy.
The Standard & Poor’s 500-stock index fell 0.8 per cent, the Dow Jones industrial average lost 0.43 per cent and the Nasdaq composite index lost 1.02 per cent in afternoon trade. European markets were down almost 2 per cent in afternoon trade.
Closer home, indices in Hong Kong, Singapore, South Korea, Japan, China and Taiwan were all trading in the red. Japan’s Nikkei closed at 11309. 13, down 1.39 per cent. Hong Kong’s Hang Seng index fell 1.72 per cent to 22906.67.
Metals, banks, realty and capital goods stocks were the worst performers among the 12 sectors that ended weak. Analysts said banking shares took a hit on reports of muted loan growth so far this year.
While 29 out of the 30-share Sensex scrips fell, the advance-decline ratio at the BSE showed 904 shares gaining, while 1929 shares ended in the negative territory.
In one economic report released on Thursday, the US Labour Department said the number of Americans filing new claims for unemployment benefits rose 20,000 to a seasonally adjusted 362,000, above expectations for 355,000.