Sensex Drops as Us Federal Reserve Maintains Hawkish Stance, SJVN Stock Plummets 13%

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Sensex Drops as Us Federal Reserve Maintains Hawkish Stance, SJVN Stock Plummets 13%
Credit: © Reuters.

The Indian stock market experienced a significant decline this week, with the Sensex dropping 571 points due to the US Federal Reserve's continued hawkish stance on rates. This comes after an impressive streak where the index gained over 3,000 points in 11 consecutive sessions. Power producer SJVN (NS: SJVN )'s stock price crashed by 13% on Friday due to concerns about excessive supply following the government's decision to divest stake in the company.

Earlier in the week, the Indian government announced plans to sell a 5% stake in SJVN through an offer for sale (OFS) route. The OFS is priced at Rs 69 per share, offering a 15.6% discount to Wednesday's closing price of Rs 82. The base size of the offer is 9.7 crore shares, with an option for additional shares. This move could generate approximately Rs 1,334 crore and reduce the government's stake in SJVN to about 55%. The Himachal state government currently holds around 27% in the company.

The US central bank's hawkish stance on rates has left investors jittery as prospects of future rate hikes rose, pulling down global markets. On Thursday, the Sensex fell by 571 points to 66,230. In three sessions, the index lost about 1,600 points after gaining over 3,000 points in 11 consecutive sessions.

According to Siddhartha Khemka, head of retail research at Motilal Oswal (NS: MOFS ) Financial Services, domestic markets slid for the third consecutive day after the US Fed’s hawkish stance in its policy meeting. "Uncertain global cues and persistent selling by FIIs are likely to keep markets under pressure in the near term," Khemka said.

Foreign portfolio investors have net sold stocks worth about Rs 11,300 crore so far this month, after remaining net buyers for six consecutive months since March. Rising crude oil prices, weakness of the rupee, and continued selling by foreign investors also contributed to the negative sentiment in the Indian market.

Indian shares closed lower on Friday, with the benchmark Sensex logging its worst week in over 15 months due to lingering worries over a higher global interest rate environment following the U.S. Federal Reserve’s hawkish tone. The main Nifty 50 index closed down 0.34% at 19,674.25 points, while the S&P BSE Sensex fell 0.33% to 66,009.15 points. Both indexes had hit their all-time highs last week.

Higher interest rates dry up liquidity from the markets, increasing the cost of capital. Foreign investors have been net sellers so far this month, offloading shares worth $996.2 million as of Sept. 20, as per National Securities Depository Ltd data. Foreign inflows into Indian equities were $15.45 billion this year, compared with $16.5 billion of outflows last year, as per LSEG data.

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