Sensex turns lower on Fed's taper decision
India's stock markets opened higher despite the announcement of Fed taper overnight but could not hold on to its initial gains.
The US Federal Reserve last night said it would reduce its monthly asset purchases by $10 billion to $75 billion, but it also indicated that its key interest rate would stay at rock bottom even longer than previously promised.
Finance Minister P. Chidambaram said in a statement said India is better prepared to deal with any consequences of the U.S. Federal Reserve's move to reduce monetary stimulus, "(The) government is of the view that the markets had already factored in the U.S. Federal Reserve's decision and therefore is not likely to be surprised by these moderate changes," Chidambaram said in a written statement released by his office.
Analysts don't expect significant effect on Indian markets due to Fed taper. Taimur Baig of Deutsche Bank said he does not expect liquidity tightening due to the taper and the stronger US economy to support financial markets. He expects the rupee remain in the low-sixties against the dollar.
The Sensex had surged over 150 points today at its day's high of 21,017 but profit-taking emerged at higher levels. At 11.02 am, the Sensex was down 192 points at 20,667 while Nifty was off 60 points to 6,156. At its day's low, the Sensex was down nearly 214 points at 20,646.03. The rupee was lower at 62.46 per dollar vs yesterday's close of 62.09.
IT stocks however saw some buying after the US Fed Reserve signalled better prospects for the US economy, the biggest market for Indian outsourcers. The strengthening in the US dollar against most currencies also aided the conviction in IT stocks. HCL Tech was the top Nifty gainer, up 4 per cent to Rs 1,244 after earlier hitting a high of Rs 1,257.
(Also read: Fed begins QE taper: Will Indian stocks come under pressure?)
Explaining today's volatility, Phani Shekhar of Angel Broking said fund managers took advantage of initial rally to book profits before the year-end.
Savendra Srivastava, a market analyst, said some volatility is expected after a big event like the announcement of Fed taper.
