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HomeBusinessSensex falls 231 points as Yellen says US ready for rate hike

Sensex falls 231 points as Yellen says US ready for rate hike

sensex (2)Indian shares fell sharply on Thursday in their biggest single-day percentage drop in more than two weeks after hawkish comments from US Federal Reserve Chair Janet Yellen reinforced the case for an interest rate hike later this month.

Sentiment was also hurt after a business survey released on Thursday showed India’s services industry barely expanded in November, growing at its weakest pace in five months.

Yellen said on Wednesday she was “looking forward” to a US interest rate rise that will be seen as a testament to the U.S. economy’s recovery from recession.

Fed policymakers are widely seen raising interest rates for the first time in almost a decade at their next meeting on December 15-16.

“Fundamentally nothing has changed but FIIs are selling frontline stocks which is where you’re seeing pressure on the markets,” said Deven Choksey, managing director at KR Choksey Securities.

Foreign investors, who account for little under 24 per cent of Indian stock ownership, were net sellers in November, offloading over Rs. 7,000 crore worth of shares.

The Sensex fell 231 points or 0.89 per cent to 25,886 while Nifty ended 67 points or 0.85 per cent lower at 7,864 – their biggest single-day percentage decline since November 18.

Falls were led by stocks which have a higher percentage of foreign ownership, on worries that a hike in US interest rates would lead to capital outflows.

ICICI Bank fell 1.7 per cent, while HDFC dropped 0.95 per cent.

Shares of auto and IT services companies fell as floods hit normal business activities in Tamil Nadu.

Infosys fell 0.3 per cent, while TCS was down 0.60 per cent. Most Indian IT companies have 10-30 per cent of their workforce based in Chennai, the capital of Tamil Nadu.

TVS Motor dropped 2 per cent while Ashok Leyland fell 1 per cent. Chennai Petroleum slumped 5 per cent after it shut its 210,000 barrels per day (bpd) Manali refinery on Wednesday.

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