Indian stock benchmarks fell for the second consecutive day and followed a broad sell-off in global markets as the Federal Reserve’s aggressive stance fueled fears of a recession and an escalation of the Ukraine crisis pushed world equities to nearly a 2-year low .
The BSE Sensex fell 337.06 points to end at 59,119.72, and the broader NSE Nifty-50 fell 88.55 points to close at 17,629.80, with both benchmarks amplifying the previous session’s losses.
“Indian markets again showed resilience in the face of global weakness after the US Fed sounded more aggressive in its future move. Nifty opened the gap downwards but tried to recover twice during the day, eventually closing with a loss of 86 points out of 17,630,” said Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services.
Power Grid, HDFC Bank, HDFC, Axis Bank, Bajaj Finserv, ICICI Bank and UltraTech Cement were the biggest laggards of the Sensex group with 30 shares. However, Asian Paints, Maruti, Titan, Hindustan Unilever and ITC were among the winners.
“Indian markets reacted mainly to the aggressive undertone of the US Federal Reserve on interest rates, which fueled investor pessimism. As expected, bank stocks took a hard hit, leading to an extensive correction in local benchmarks,” said Shrikant Chouhan, head of Equity Research fir Retail at Kotak Securities.
“Recession fears could put pressure on global connected sectors such as IT, metals and pharma for some time. On the other hand, consumer and raw input sectors such as FMCG, paint, tires and autos are likely to benefit from strong domestic demand and a decline in the commodity market.” prices,” he added.
The rupee crashed to a new all-time low, at 81 per dollar not too far off, as the bleak global outlook hurts risky assets.
Major stock markets in Europe fell more than 1 percent after Asian markets plunged to a two-year low following a dismal close on Wall Street following the Fed’s rate hike and revised GDP forecasts.
“Fed is delivering exactly what it said it would (with rate hikes), but the markets have shifted the path of interest rates quite a bit,” said Robert Alster, chief investment officer of Close Brothers Asset Management.
“Suddenly we enter a scenario where everything gets much longer… It’s a little disturbing in some ways, but at least they’ve laid out the roadmap and the economy is second to monetary policy.
Still, S&P 500 futures pointed to a positive open after the benchmark fell more than 20 percent on Wednesday from its all-time high in January.
“The Fed is working on a hard landing — a soft landing is almost impossible,” Seema Shah, chief global strategist at Principal Global Investors, wrote in a note following the Fed’s decision. “(Mr) Powell’s admission that there will be below-trend growth for a period of time should be translated as a central bank speaking for recession. Times will get tougher from here on.”
Traders are also preparing for the Bank of England’s announcement to announce its seventh consecutive rate hike later in the day, following a jumbo hike by central banks in Switzerland and Norway.
US yields appear attractive and investors believe that other economies are too vulnerable to support interest rates as high as those in the US, helping to push the dollar up.
The intensification of Russia’s conflict with Ukraine and tensions between Beijing and Taiwan are further hurting sentiment.