BENGALURU: Indian shares fell nearly 2% on Friday on fears that an aggressive US Federal Reserve would trigger foreign fund outflows, while third-party agents for recovery of loans to Mahindra Group’s financial services by the central bank. Financial stocks declined after they stopped using it.
The NSE Nifty 50 index fell 1.72% to 17,327.35, while the S&P BSE Sensex fell 1.73% to 58,098.92.
Both the indices fell over 1% this week and have erased the gains so far this year.
Aggressive increases in US Federal Reserve members’ estimates and persistently high rates over the next year or two triggered another round of dollar buying, bringing other assets into play.
“The Fed’s move will bring back a lot of money coming into emerging markets,” said Saurabh Jain, assistant vice president (research) at SMC Global Securities.
Data from Refinitiv Eikon shows foreign investors this week netted $152 million in Indian equities as of Thursday, after net purchases of $819 million last week.
Indian stocks fall as Fed flags more rate hikes
The Nifty Bank index fell 2.7%, while the Finance index fell 2.5%.
Mahindra & Mahindra Financial Services shares fell 13.1% after the Reserve Bank of India directed the company to stop using third-party services for debt recovery till further orders.
“This move (by RBI) will be seen as negative for companies lending for stocks as well as vehicles. This will reduce the collection capacity for these companies,” said AK Prabhakar, head of research, IDBI Capital.
The Nifty Bank index had gained nearly 19% so far in the quarter and hit a life high last week on expectations of higher credit growth.
“Banks are seeing some improvement after outperforming other sectors,” Jain said. He said that despite the tough macro environment, there is no serious threat to growth in banks.
Shares of Power Grid Corporation of India fell 8%, and was the top laggard in the Nifty 50 index, while Indian pharmaceutical company Divi’s Laboratories Ltd’s gained 1.8%.