Benchmark indices continued the selling on the fifth consecutive session on Thursday. At close, the Sensex was down 1,158.08 points or 2.14 per cent at 52,930.31, and the Nifty was down 359.10 points or 2.22 per cent at 15, 808. About 747 shares have advanced, 2542 shares declined, and 84 shares are unchanged. Inflationary and interest rate hike headwinds, that have emerged as a fallout of the Ukraine-Russia war and easy monetary policy, are biting into equity returns. As a result, the bear-run on the bourses entered its fifth straight day on the weekly F&O expiry day, with the benchmark indices sliding over 2 per cent each. They also closed at their respective 9-week lows.
All Sectors in Deep Red
While Wipro and HCL Tech was the sole gainers (up 0.7 per cent and 0.1 per cent, respectively) on frontline indices, losses were led by IndusInd Bank and Adani Ports (down 6 per cent each), Tata Steel, Tata Motors, Bajaj twins, Hindalco, Axis Bank, HDFC duo, Titan, L&T, JSW Steel, and SBI.
In the broader markets, the BSE MidCap index fell 2.2 per cent and the BSE SmallCap index shed 1.9 per cent.
Sectorally, all the key indices closed in the negative zone with the Nifty PSU Bank index seeing the worst knock, down over 5 per cent.
Why is the Stock Market Falling Today?
Inflation continues to be a major headwind for markets. Consumer inflation in the US in April coming at 8.3 per cent reinforces the market’s concern about aggressive rate hikes by the Fed and the possibility of a US recession in 2023. With the dollar index at 104 and expected to strengthen further FIIs are likely to continue selling till Indian valuation becomes attractive. Even though DII buying is more than FII selling now, that is not enough to lift sentiments in the market since the macro headwinds are strong. The market’s preference for value over growth is reflected in the strength of high-quality banking stocks which are even now at buyable valuations, said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
Policy Tightening By Central Banks
The key reason given by investors and experts for the market’s weakness is the Federal Reserve’s policy adjustment. The Fed warned early in 2022 that it was shifting to tighter monetary policy in an attempt to tamp down soaring inflation, signalling a substantial shift in the investing climate.
Mohit Nigam, Head – PMS, Hem Securities, said: “According to the SGX Nifty and Global Trend, the Indian market will open lower. The US stock market was trading lower. Indian markets are seeing turbulent swings as investors continue to be concerned about rising interest rates, fears about slowing economic growth, and additional tightening measures in China.”
Weak Global Cues
US stocks ended sharply lower on Wednesday, with the Nasdaq dropping more than 3 per cent and the Dow falling for a fifth straight day after inflation data did little to ease investor worries over the outlook for interest rates and the economy. The Dow Jones Industrial Average fell 326.63 points, or 1.02 per cent, to 31,834.11, the S&P 500 lost 65.87 points, or 1.65 per cent, to 3,935.18 and the Nasdaq Composite dropped 373.44 points, or 3.18 per cent, to 11,364.24.
Tokyo stocks fell in early trade Thursday after overnight drops on Wall Street as investors fret over inflation. The benchmark Nikkei 225 index fell 1.34 per cent, or 350.51 points, to 25,863.13 in early trade, while the broader Topix index gave up 0.79 per cent, or 14.59 points, to 1,836.56. The dollar stood at 129.58 yen, down from 130.00 yen seen Wednesday in New York.
Hong Kong stocks opened lower Thursday after drops on Wall Street on renewed fears of surging inflation. The Hang Seng Index tumbled 1.35 percent, or 267.68 points, to 19,566.89. Mainland China’s Shanghai Composite Index dropped 0.45 per cent, or 13.90 points, to 3,044.80, while the Shenzhen Composite Index dropped 0.64 per cent, or 12.33 points, to 1,906.18.
What Should Investors Do?
Yash Gupta, Equity Research Analyst, Angel One Ltd., “We are seeing a broader market selling pressure, midcaps and small caps are facing more selling pressure than the Nifty and Sensex. Selling pressure started from the news of the rate hike by RBI and hawkish Fed commentary. We also continue to see selling figures from FII and DII continue to buy but last month we have seen a dip in the mutual fund inflow. We expect markets to be volatile in the near term depending on the domestic news as well as foreign markets. We suggest long-term investors to deploy 50 per cent of the new fund and for the remaining wait for the market to rebound.”
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