Nifty, Sensex close a percent in the red after last hour of comeback

• Fitch downgraded the credit rating of the US from AAA to AA+, due to its finances and debt burden.
• Fitch said that it noted a steady deterioration in governance in the last 20 years.
• US Treasury Secretary Janet Yellen said that the downgrade is based on outdated data.
• The ripples of the US downgrade have also been felt across all Asian markets which are all trading in the red.

Indian stock markets plunged on Wednesday after rating agency Fitch downgraded the sovereign rating of the US from top rating of AAA to AA+ due to its finances and debt burden. It was a day of volatile trade and India’s market volatility barometer (VIX) shot up 10%. The last hour did see a healthy recovery with both the Nifty and the Sensex coming off their intraday lows.

Benchmark indices closed around a percent lower with the Sensex shedding 676 points, and Nifty falling by 207 points. From the Nifty pack, HUL, Nestle India, Asian Paints and Adani Enterprises are some of the gainers in early trade while Tata Steel, Tata Motors, Hero Motors and NTPC are the top laggards.

“Nifty's recent slip below its consolidation indicates a bearish sentiment. The Relative Strength Index (RSI) is signaling a bearish momentum for the future. On the downside, support is observed at 19,500, a decisive fall below 19,500 may create further negativity; while resistance is seen at 19,600,” said Rupak De, Senior Technical analyst at LKP Securities.

On Mint Street, the Indian rupee weakened more than 30 paisa against the US dollar. The Indian rupee closed at 82.58/$ against Tuesday’s close of 82.26/$.

The ripples of the US downgrade have also been felt across all Asian markets – like Japan’s Nikkei, Singapore’s SGX, Hong Kong’s Hang Seng and Korea’s KOSPI traded in the red. Dow Jones however closed in the green, up by 0.2% ahead of the Fitch downgrade.

Fitch downgraded the US rating over concerns of fiscal deterioration expected in the next 3-years and repeated debt-ceiling negotiations with last minute resolutions that has eroded confidence in fiscal management, a morning report by Bank of Baroda said.

Fitch also said that it noted a steady deterioration in governance in the last 20 years. US Treasury Secretary Janet Yellen said that the downgrade is based on outdated data between 2018 to 2020.

“The Indian market witnessed a broad sectoral slide, affected by weak global market trends. Negative news regarding the US rating downgrade on fiscal concerns, coupled with weak factory activity data from Eurozone and China, led to widespread worries across the globe. Additionally, prolonged FII selling, triggered by a rise in US bond yields, has disrupted the mood of the domestic market,” said Vinod Nair, head of research at Geojit Financial Services.

The US 10-year yield rising above 4% and the dollar index appreciating to 102 too are bad news for emerging markets. Indicators like PMI from the Euro Zone and China suggest a slowdown, say market experts.

Brent crude went up by 0.4% in today’s trade to $84.4 per barrel.

Gold prices fell by ₹180 to ₹60,250 per 10 grams in the national capital on Wednesday amid weak global cues, according to HDFC Securities. The precious metal had closed at ₹60,430 per 10 grams in the previous trade.

(With PTI inputs)