Markets in red, defying Fed’s smaller rate hike good news; banking stocks drag, SBI top loser

More sustained USD losses, Scotiabank

Because it was in line with expectations on the street, the US Federal Reserve’s modest rate increase should have improved market sentiment. However, the U.S. Treasury Secretary’s comments on insurance over depositors at bankrupt banks —- dampened the mood, and the Fed’s rate rise booster was unable to keep bulls on stocks. Indian markets suffered a significant loss on Thursday, with the banking sector suffering the most. The Sensex fell below the crucial milestone of 58,000, and the Nifty 50 dropped under 17,100.

Sensex dropped by 289.31 points or 0.50 to close at 57,925.28. Nifty 50 dropped by 75 points or 0.44% to close at 17,076.90.

Although BSE Bankex lost about 417 points, Bank Nifty fell by more than 382 points. Stocks in Technology and capital goods were also among the underperformers.

Geojit Financial Services’ Head of Research, Vinod Nair, stated: “Concerns were raised by the U.S. Treasury Secretary’s declaration that the Fed was not considering blanket insurance for all deposits, despite the fact that the Fed’s decision to raise rates by 25 basis points was in line with expectations. With the support of favourable U.S. futures and the Fed’s hints that it may halt rate hikes sooner, the domestic market tried to recover its initial losses. The European market’s slow start, which was sparked by a 50bps hike by the Swiss National Bank, caused the recovery to be fleeting.”

The US Federal Reserve opted to raise important interest rates by a significantly lesser amount—a quarter percentage point—in its most recent monetary policy. Currently, the federal funds rate ranges from 4.75% to 5%. But, the Fed also made a case for delaying further rate increases in light of the recent volatility in the financial sector caused by the demise of two banks. The US banking system, according to the FOMC, is solid and resilient.

Yet, US Treasury Secretary Janet Yellen provided a briefing on American banks following the Fed’s policy announcement. According to her, institutions across the nation are bolstering their liquidity because they are extremely concerned about a spread of the problems at Silicon Valley Bank and Signature Bank.

Yellen noted that she hasn’t thought about or talked about anything involving general insurance or deposit guarantees. She also disclosed that many mid-sized banks have expressed significant concern to them about the uninsured deposits over the previous few weeks.