Indian markets see huge sell-off after US Fed says interest rate hike will be sooner than expected

Indian markets see huge sell-off after US Fed says interest rate hike will be sooner than expected
  • After seeing a positive trend in the first few days of the year, the market witnessed a huge sell-off on weak global cues.
  • Markets were swayed by the US Federal Reserve Minutes commentary, which indicated interest rate hike will be sooner than expected and the central bank will stop economic stimulus measures.
  • Investors shrugged off shares of banks, IT, metals, auto, infrastructure and bought some essential services stocks like pharma.
Indian markets fell steeply about 900 points on January 6 mirroring losses in other Asian and the US markets after the US Federal Reserve announced that it will stop measures for economic stimulus and increase interest rates sooner than expected.

“Participants generally noted that, given their individual outlooks for the economy, the labour market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated. Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve's balance sheet relatively soon after beginning to raise the federal funds rate," said the US Fed in the monetary policy minutes.

From the US Fed minutes commentary, markets have reportedly anticipated Fed to reduce its holdings of treasury bonds, which pushed the 10-year US Treasury yield to 1.7%.

The US Fed commentary to “reduce the size of the Federal Reserve's balance sheet” indicated that it will soon sell some of the bonds held in its account. This triggered the 10-year treasury bond yield, which went up to 1.7%
Global markets % change as of 10:55 a.m.
ASX All Ordinaries (Australia) -2.71%
SE Composite Index (China)-0.25%
Hang Seng (Hong Kong)-0.57%
Sensex (India)-1.35%
Nikkei 225 (Japan)-2.6%
TSEC 50 Index (Taiwan)-1.23%
Huge sell-off in the market led to fall in shares of banks, fast moving consumer goods (FMCG), IT and metal companies. As the fear of COVID-19 persists with rising cases and increasing restrictions in many Indian cities, investors bought some selective essential company stocks.
Companies % change in share price
Gland Pharma2.47%
Laurus Labs0.71%
Abbott India0.67%
Natco Pharma0.45%
Alkem Laboratories0.18%
Radico Khaitan0.76%
Procter & Gamble Hygiene and Health Care0.63%
Few weeks back, the US Fed said that it will soon end COVID-19 stimulus programmes and raise interest rates three times next year, which triggered the stock markets last year.


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