Markets decline for fourth straight day ahead of Federal Reserve meet

Sensex sheds 1,000 pts in four sessions to end at one-week low

Indian markets ended with losses for a fourth straight day on Wednesday as investors awaited the outcome of the Federal Reserve’s latest policy meeting.

The Sensex fell 329 points, or 0.6 per cent, to end at 57,788, its lowest close since December 6 –when it had hit a three-month low. The Nifty fell 103 points, or 0.6 per cent, to end at 17,221.

In the last four sessions, the Sensex has lost close to 1,000 points or 1.73 per cent, amid sustained selling by overseas investors due to concerns around Fed tapering, spread of the omicron variant and depreciation in the rupee.

Overseas investors sold shares worth Rs 3,407 crore on Wednesday.

Analysts said investors are trying to gauge how the Fed's tapering of bond purchases and interest rate hikes will play out on risky assets.

Later during the day, the Fed was expected to announce a roadmap for reducing bond purchases and give a timeline for interest rate hikes from next year.

The reversal of aggressive bond purchase programme and the near-zero interest rates regime—which has helped the markets skyrocket from the pandemic lows—is expected to create a lot of volatility in the markets. Investors have got a glimpse of it over the past few weeks.

"Anxiety over more anticipated hawkish policy statement by Fed are pressurising the markets. Overall, the Fed is expected to announce a faster end to its bond-buying campaign and may signal a rate hike in 2022 amid rising inflationary pressures," said Vinod Nair, head of research, Geojit Financial Services.

Other Asian markets also corrected as investors assessed the potential outcome of the Fed meeting. The Hang Seng and Shanghai Composite Index fell after the latest economic data showed China's economy slowed further in November amid weaker domestic consumption and concerns in the property sector.

Apart from the Federal Reserve, the Bank of England and the European Central Bank are holding their policy meets this week. Investors are watching how these influential central banks navigate the inflationary pressures and latest threat to the world economy in the form of the omicron variant.

The inflation in the UK has risen to a 10-year high. The US producer price index posted a record annual increase of almost 10 per cent in November, the biggest annual gain since 2010. The US consumer price inflation rose 6.8 per cent in November against a year ago, marking its highest reading since 1982.

“All eyes will be on the US Fed meeting tonight, and we're going to see the reaction in early trade on Thursday. While most expect the committee to hold rates citing the possible challenges due to the new Covid-19 variant, commentary on tapering, inflation and growth would be critical," said Ajit Mishra, VP- research, Religare Broking.

Close to two-thirds of Sensex stocks ended the session with losses. Bajaj Finance fell the most at 3.1 per cent. Bajaj Finserv fell 2.6 per cent, and ITC by 1.8 per cent. Barring two, all the sectoral indices ended the session with losses. Realty stocks fell the most, and their gauge fell 1.8 per cent.

The market breadth was mixed, with 1,681 stocks declining and 1,665 advancing. Around 315 stocks hit their 52-week high, and 554 were locked on the upper circuit on BSE.