Sensex dives 563 points on US rate hike worries

MUMBAI: Weighed by weak global cues, precipitated by the nervousness of markets just ahead of the crucial jobs data in the US, global stocks witnessed another day of selloff which pulled the sensex down by 563 points at 25,202, nearly a 14-month closing low for the index. Indian investors are also jittery because of the below-normal monsoon, which in turn may force the RBI to not cut rates in a hurry because a bad monsoon may fuel inflation fears again.The day also saw FIIs taking out net Rs 1,287 crore from the stock market while domestic funds net bought stocks worth Rs 1,129 crore.
In Friday's market, several bank stocks led the slide with SBI, ICICI Bank and Bank of India touching their 52-week low levels. The slide in the global markets, including India, came despite close of trading on Chinese and Hong Kong markets due to celebrations marking the end of World War II, 70 years ago.
Market players said that a strong jobs data from the US will raise chances of an increase in interest rate by the US Fed in its meeting later in the month -the first time in nearly a decade. That could in turn lead to outflows from emerging markets including India and hence the selling. The weak economic data from China is also another major reason for the current selloff globally, they said. The day's slide also left investors poorer by Rs 2 lakh crore with BSE's market capitalization now at Rs 93.7 lakh crore.

Since August 1, net FII outflow from India has been about Rs 21,000 crore, Sebi data showed, and a major part of this outflow was due to these two reasons, China and the anxiety about US Fed's rates decision, brokers said.
"Weak cues from the Asian peers alongside with figures showing continuous selling from the foreign investors were weighing on the sentiments on Friday," said Jayant Manglik, president, retail distribution, Religare Securities. "Besides, participants took a cautious approach ahead of US nonfarm payroll data as majority expects further improvement may result in a rake hike by the US Fed in the upcoming policy meet. In line with the benchmark, all the sectoral indices also ended in the red," Manglik said.