The domestic market ended in the red on September 21 on profit booking ahead of the expected rate hike by the US Federal Reserve. The nuclear threat by Russian President Vladimir Putin to the West also roiled sentiment.
Sensex fell 263 points, or 0.44%, to 59,456.78. Nifty closed at 17,718.35, down 98 points, or 0.55%. Mid and smallcaps suffered slightly more as the BSE Midcap index closed 0.63% lower while the Smallcap index fell 0.69%.
The Federal Reserve is expected to raise interest rates by 75 bps for a third straight time on September 21. Moreover, it may also hint at the future trajectory of rate hikes to bring inflation down.
A rate hike of about 75 bps is widely expected and the market might have discounted it. What seems to have added to the nervousness is Putin’s words.
CNBC reported that “Russian President Vladimir Putin on September 21 announced a partial military mobilization in Russia, putting the country’s people and economy on a wartime footing as Moscow’s invasion of Ukraine continues. Partial military mobilization puts Russia on a firmer war footing and it means that businesses and citizens have to contribute more to the war effort.”
Putin also warned he could use nuclear weapons to defend Russia.
"If the territorial integrity of our country is threatened, we will, without doubt, use all available means to protect Russia and our people - this is not a bluff," Reuters quoted Putin saying so in a televised address.
A fresh salvo from Putin triggered a fall in European markets as investors sold riskier equities and turned to safe-haven assets such as bonds and dollars.
Back home, Sensex witnessed profit-booking in most sectors with power, utilities and commodities indices falling more than 2% each.
"Markets across the globe were trading with considerable volatility ahead of the Fed policy announcement. A 75bps hike by FED was factored in by the markets, while reports of mobilising Russian forces in Ukraine has escalated geopolitical tension and fears of rising inflation,” said Vinod Nair, Head of Research at Geojit Financial Services.
Nair said that any military escalation will have a significant effect on the world and domestic economy. This will have an influence on the near-term trend of the global market and implications on the local market can be high as it is trading at premium prices compared to the world.
Investors lost more than ₹2 lakh crore in a single day as the overall market capitalisation of BSE-listed firms dropped to ₹281.2 lakh crore from ₹283.4 lakh crore in the previous session on September 20.
Now, a 75bps rate hike can keep the market calm while in case of a 100 bps hike, there may be a strong selloff in the coming session.
“Markets will react to the Fed’s interest rate hike decision while the 75bps have been factored in, an aggressive commentary or sharper rate hike of 100bps could lead to higher volatility and pressure on the market. An inline rate hike can bring relief to the market,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services.
Technicals
Analysts pointed out that Nifty has been consolidating in the narrow range of 17,500-17,950 on a weekly closing basis for the last six consecutive weeks. Any decisive breakout from this range would give a directional move to the Nifty.
Ajit Mishra, VP - Research, Religare Broking said the 17,400-17,500 zone would act as a cushion for Nifty while a rebound towards the 17,900-18,000 zone may attract selling pressure.
Key market data
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of MintGenie.
