Sensex falls 500 pts on weak global cues amid US rate cut concerns; Nifty below 22K

Indian equity indices opened lower on Friday amid US rate concerns. Investors await stress test results for small- and mid-cap mutual funds, focusing on froth, resilience, redemption pressures, and key stock movements like Paytm and RailTel Corporation.

Indian equity indices traded in the red on Friday, tracking weakness from global peers on rising worries over future rate trajectory in the US, while investors brace for the results of stress test of small- and mid-cap mutual funds amid concerns of froth in these segments.

Sensex lost 600 points to trade below 72,500 mark while Nifty traded below 22,000 level. The benchmarks have each lost about 2% this week, and are set for their worst week since the end of October.

In the broader markets, both midcap and smallcap indices lost over 1% each as stress test results of mutual funds in the segments trickled in.

Including the day's losses, they have declined about 6.3% and 5% for the week, and are set for their worst performance in 15 months, following concerns raised by the markets regulator on froth in the segments on Monday.

"Results of the stress tests conducted by the mid and small-cap schemes of mutual funds expected today will be keenly watched by the market. If there are clear signs of stress there can be regulatory action by the SEBI, which will impact sentiments in the broader market. Even without stress tests one thing is clear: the broader market valuations are expensive and in some pockets valuations are frothy. This is clearly unsustainable," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Here are key factors behind the fall in benchmark indices today:

Hot US Inflation Cools Sentiment

Risk sentiment took a hit after hotter-than-expected price pressures raised concerns over how soon the US Federal Reserve will start cutting rates. The Federal Open Market Committee is set to meet next week, and is widely expected to keep rates on hold.

Global Markets Weak

Asian markets declined, with the MSCI Asia ex-Japan losing 1.1%. Wall Street equities closed lower overnight after data showed hotter-than-expected U.S. producer price index inflation in February. The data, which followed sticky consumer inflation earlier in the week, added to worries of delay in the onset of interest rate cuts from the Federal Reserve this year.

FIIs In Selloff Mode

Foreign portfolio investors sold Indian shares worth Rs 1,356 billion rupees on a net basis on Thursday. Domestic institutional investors bought a net of Rs 139 crore of stocks.

Crude Oil Tops $85
Oil prices edged lower on Friday but were on track to gain nearly 4% for the week as sharp declines in U.S. crude and fuel inventories, drone strikes on Russian refineries and a rise in energy demand forecasts buoyed prices.

Brent crude oil futures for May fell 15 cents, or 0.2%, to $85.27 a barrel, after crossing $85 a barrel for the first time since November on Thursday. U.S. West Texas Intermediate (WTI) crude for April fell 14 cents, or 0.2%, to $81.12.

(With inputs from agencies)

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Source: Stocks-Markets-Economic Times