Markets opened sharply lower on Monday tracking weakness in Asia and a plunge in US stocks on Friday on rising prospects that the US Federal Reserve could hike interest rates soon. The scare of a pullout by US funds – a hike in rates would make the dollar stronger prompting funds to invest in the greenback instead – has already led to a 420 point drop on the BSE’s Sensex.
At 10:00 AM, the broader index was trading 1.4% down at 28,385 points, while the NSE was down 1.5% at 8731 points.
This is the biggest fall since June when the entire world saw a collapse over the impact of the Brexit vote when the United Kingdom voted to leave the European Union.
Stocks across the board were down on Monday morning, except Infosys which was trading up 1.1%; remaining 30 stocks in the bellwether Sensex were trading sharply down led by Adani Ports which plunged 3.2%, and Axis Bank which was trading down 3.1%.
“Contradictory statements from the US Fed seems to be acting here as it did with the US markets on Friday,” said the research head of a large European foreign bank. “There is a possibility that a rate hike could be approved this month and probably this week and that has led to a scare among investors,” added the executive who cannot be named.
The US had two weeks back almost ruled out a hike after weak non farm jobs showed the economy had not yet revived. But media reports last week suggested that the US central bank was again considering an increase, with the Boston Federal Reserve president saying that bets on a higher interest rate were more in favour.