Fed sends bulls into rat holes; US stares at recession

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By S Jha

New Delhi, December 15: Down Jones nosedived by over 800 points on Thursday afternoon. Indian indices went into a freefall. The bulls threw towels and ran away after the US Fed sent ferocious bears into the stock market rings globally.

The US Fed by stating that the battle against inflation is not yet won sent shockwaves globally. The US Fed made it clear that it would stay on course to keep raising the rates. Tesla Chief Elon Musk who had earlier accused that the US Fed would push the US into recession went into a selling spree of the Tesla shares, sending the share price of the electric car manufacturer crashing.

Inflation in India has also showed signs of cooling off on the lines of the US. The RBI also hiked the Rep Rate early this month. There is a growing voice in India that the RBI must cease raising the rates, which may send India too into a massive slowdown. Former RBI Governor Raghuram Rajan has already warned that India is headed to a state of slow economic growth next year. With this year’s Union Budget being the last full Budget of the Narendra Modi government, the street is expecting Finance Minister to go full steam with populism, which may deprive the growth engines for the economy. The European Central Bank also hiked the rate by 50 basis points on Thursday.

The IT stocks cracked on Thursday along with metal scrips. The banking stocks which had been rallying also lost steam by afternoon and went into a freefall in the last one hour. The massive sell out triggered bearish signs for the bourses. The institutional action was, however, not high in scale, as the foreign institutional investors sold Rs 700 crores of equities. The domestic institutional investors were net buyers with Rs 261 crores of fund flow into the equities.

FANG, much celebrated stock pack, along with mega tech companies went into a freefall in the US equity markets. Apple, Tesla, NetFlix, Alphabet and other tech giants are being battered in the US markets, which may be signs of worries for the valuation of the Indian IT companies. With Infosys announcing its quarterly result on January 12, traders and investors may be keeping a watch on the corporate earnings to pick cues, which may leave the December series highly volatile.

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