Home / Markets / Stock Markets /  Sell-off drags markets as investors become cautious following budget

Markets snapped a three-day gaining streak on Thursday as the budget-led investor euphoria seemed to be waning. The BSE Sensex ended down 770.31 points, or 1.29%, at 58,788.02. The Nifty slipped 219.80 poi-nts, or 1.24%, closing at 17,560.

Other markets in Asia-Pacific were mixed on Thursday. Japan’s Nikkei 225 fell 1.06%, while South Korea’s Kospi bucked the downward trend rising 1.67%. China and Hong Kong remained shut for the Lunar New Year holidays.

The domestic market extended its losses following broad-based selling as global cues turned in favour of bears, according to Vinod Nair, head of research, Geojit Financial Services. “US futures were under pressure following weak earnings numbers reported by Meta (Facebook), while European markets fretted about monetary policy tightening," Nair said.

The Bank of England (BoE) raised interest rates to 0.5% on Thursday and nearly half of its policymakers wanted a bigger increase to contain rampant price pressures, as the central bank warned inflation will soon top 7%. The move follows hot on the heels of a rate hike in December, marking the first back-to-back increases in the bank rate since 2004 and reflecting urgency among MPC members to show they are on top of a growing cost-of-living crisis. In contrast with the approach taken by the European Central Bank, BoE warned further “modest tightening" in future, though growth will be hurt by global energy and goods price inflation.

Indian markets are seeing a pause in momentum as the focus now shifts away from the budget to interest rate and inflation, said Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services Ltd.

“The forthcoming Reserve Bank of India (RBI) policy meet on 9 February will also be important to watch. Q3FY22 earnings has been good so far and most of the management commentary suggest Q4 numbers will remain strong. Overall we remain positive on the market. From a sector perspective, we expect infra, construction, cement, capital goods, affordable housing, logistics, and defence to remain in focus," Khemka said.

India VIX, or the Indian volatility index, rose 2.73% at 19.17 on Thursday, indicative of an increase in anxiety and nervousness among investors.

Foreign institutional investors (FIIs) have started to buy Indian equities once again. In February so far, FIIs have been net buyers of Indian shares worth $67.70 million after a massive outflow of $4.81 billion last month. FIIs have been consistently selling Indian shares since October 2021. Domestic institutional investors have pumped in 2,023.66 crore so far in February, following a net inflow of 21,928.40 crore in the first month of the year.

(Reuters contributed to the story)

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