MUMBAI : Benchmark stock indices opened at their lowest level in over two months on Monday after US Federal Reserve chair Jerome Powell’s comments on interest rates rattled global markets but recovered significantly during the day.

The recovery prompted analysts to remain bullish on equities, despite the fear gauge VIX surging to a two-month high of 19.82 and the rupee testing a new low of 80.13 against the dollar.

The Nifty index closed 246 points lower at 17,312.9, while the Sensex slid 861 points to close at 57,972.62. Both indices closed sharply above the day’s lows of 17,166.2 and 57,367.47, respectively, as domestic institutions stepped in at lower levels, buying shares worth a provisional ?144 crore even as FIIs sold a provisional ?561 crore of equities. The last time the indices fell so sharply was on 13 June.

“There are issues in the US market, but sharp falls in our neck of the woods would be used as an opportunity, as evidenced today," said Nirmal Jain, founder and chairman of IIFL Group. “SIP (systematic investment plans) investments remain steady, at over ?12,000 crore for the third straight month in July, which will probably obviate a free fall in our markets."

Heavyweight stocks that bore the brunt of selling pressure included Tata Consultancy Services Ltd, HCL Technologies Ltd, Wipro Ltd, Infosys Ltd and Tech Mahindra Ltd, which fell between 2.78% and 4.6%, reflecting Friday’s carnage on Nasdaq, which tumbled almost 4%. Gainers included Asian Paints, Nestle India, Apollo Hospitals, Maruti and Britannia Industries, which gained 0.5-1.5%.

The Indian market recovered 18.5% from a mid-June low of 15,183 to 17,992.2 on 19 August on buying by foreign institutional investors (FIIs). But profit booking at higher levels saw the index correct from that level, with much of it happening on Monday. Despite the day’s steep correction, FIIs have remained buyers of ?49,140 crore of domestic shares this month as India outperforms emerging markets in hotspots like Russia and China.

Siddarth Bhamre, research head at Religare Broking, said the Nifty may not break the strong support of 16,800 and rally above its record high of 18,604 by the year-end.

“Whenever we’ve gapped down since October last year, Nifty has closed at the opening low of even below that. But, today (Monday), we saw the market staging a smart recovery from the day’s lows, which shows there are buyers at lower levels, and that means we are fundamentally good to test newer highs. Besides, Fed chair Powell’s comments on Friday are not new, with the market having already discounted a 1% hike in the FFR (Fed Funds Rate) through 3.5% by year-end," Bhamre said.

The rupee hit a new low of 80.13 against dollar, and the 10-year government paper rose 3 basis points higher at 7.25%, tracking sentiments in the global markets after Fed chairman Jerome Powell’s hawkish statement that the Fed would tackle high inflation even at the cost of economic growth. The currency opened at a low of 80.11 in the first few minutes of trade as the dollar index strengthened to the 109.43 mark.