How major stock markets react to news of Fed’s taper talk

Riken Mehta 
moneycontrol.com 

Follow me on Twitter @mehtariken 
 
The US Federal Reserve has been the biggest spoilsport for bulls this calendar, repeatedly catching them off-guard with its comments on reducing the size of its monthly USD 85 billion bond purchases, also known as quantitative easing (QE). In theory, the bond purchases were meant to revive growth in the US economy by encouraging consumption and investment through easy money. In practice, huge dollops of those funds found their way equities and bonds in other countries, boosting their valuations. With a prospect of less global liquidity looming, investors are worried if the valuations can sustain.

A look at the timeline of the taper remarks and how key markets reacted to those.

Dates
Dow
Hang Seng
Nikkei
Shanghai
22-May
15307 (dn 0.5%)
22669 (dn 2.5%)
14483 (dn 7.3%)
2275 (dn 1.1%)
19-Jun
15112 (dn 1.3%)
20382 (dn 2.87%)
13014 (dn 1.74%)
2084 (dn 2.7%)
18-Sep
15676 (up 0.94%)
23502 (up 1.66%)
14766 (up 1.8%)
2221 (up 1.36%)
20-Nov
15900 (dn 0.41%)
23580 (dn 0.5%)
15365 (up 1.92%)
2205.77 (dn 0.04%)

May 22, 2013: Bernanke tells Congress Fed may reduce size of month bond purchases (QE) June 19, 2013: Bernanke says Fed will begin QE taper late 2013 and end it by mid 2014 if economy revives September 18, 2013: Fed says economy not strong enough, will continue with QE November 20, 2013: FOMC minutes suggest that taper will begin shortly.

Barring Dow, all markets reacted to Bernanke comments on the next trading day. So values are of the next trading day.

Nifty

May 22 2013: Nifty closed at 5967, lost 127 pts in next trading session post Bernanke comments. Rupee was at 55.585, depreciated 0.2%.

Between May 22 and June 19, Nifty made a low of 5683 while Rupee depreciated 5.8% in the same period.

June 19 2013: Nifty closed at 5655, lost 167 pts or 2.86% in next trading session post Bernanke hinting at QE tapering in next meet. Rupee closed at 59.575, depreciated 1.46%. Between June 19 and Sep 18, Nifty made a low of 5118 (down 16% since Fed first mentioned tapering of QE on May 22), while rupee depreciated to 68.84 (rupee lost 24%) on account of heavy unwinding by FIIs.

Between May 22 and Sep 18, FIIs sold equities worth close to Rs 11500 crore.

September 18 2013: Nifty closed at 6115, gained 216 pts or 3.6% post Fed deciding not to taper QE. Rupee was at 61.775, appreciated 2.54%. Between September 18 and Nov 20, Nifty made a high of 6342, rupee appreciated to 61.01 on account of continuous buying by FIIs. FIIs bought equities worth close to Rs 28800 crore in the same period.

November 20, 2013: Nifty closed at 5999, lost 120 pts or 2% post fears of tapering.

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