Indian equity benchmarks crashed over 1.5 per cent on Tuesday, marking a third straight day of losses, driven by global stocks hitting a 2-year low on concerns over rising interest rates, escalating Ukraine crisis, and China’s pandemic. moving forward. preparing to weigh
The BSE Sensex index fell 843.79 points to 57,147.32 and the broader NSE Nifty index fell 257.45 points to 16,983.55.
IndusInd Bank, Nestle India, Tata Steel, Tech Mahindra, Infosys, Dr Reddy’s, Titan and Reliance Industries were among the laggards in the 30-share Sensex pack.
On the other hand, Axis Bank and Asian Paints saw gains.
In the previous session, both the equity benchmarks had closed lower, but on Monday, there were heavy losses compared to the earlier ones.
After a fourth consecutive fall in US stocks, stocks in Asia fell, and the dollar rose sharply amid ongoing concerns that rising interest rates and geopolitical threats would hamper global economic growth.
“Our expectation of the world economy entering a recession next year is in line with further gains in the dollar,” said Commonwealth Bank of Australia strategist Carol Kong.
The heads of the World Bank and the International Monetary Fund (IMF) have warned of a growing threat of a global recession as industrialized economies slow and more inflation prompts the Fed to raise interest rates, increasing debt pressure on developing countries. goes.
According to Bloomberg, Goldman Sachs Group chief economist Jan Hetzius wrote in a note, “A recession is very likely – our subjective probability is 35 percent in the next year – but we think it will require additional setbacks.”
Renewed upward pressure on fuel prices is one area to watch, and Goldman also sees “a small but growing risk of an unnecessary monetary policy policy if Fed officials focus too much on inflation indicators.”
On Tuesday, global stocks plunged to their lowest level in nearly two years as global recession risks started the day with a generally weak opening in European markets.
Emerging market stocks fell to their lowest level since April 2020 and are on pace to their worst year since the 2008 global financial crisis, which has lost nearly 30 percent so far.
The tone ahead of Thursday’s US inflation data is volatile, and if that figure comes in higher than expected, there could be good grounds for a 75 basis-point rate hike.
Despite the potential impact on economic growth, Fed members have so far shown little sign that they are in the mood to halt the rate-hike cycle.
“There is evidence that inflation is stabilizing, but the question remains whether inflation is peaking or stopping before another phase,” said Michael Hewson, chief analyst at CMC Markets in London. “Rate markets are reflecting that uncertainty.”
The MSCI World Stock Index was down 0.5 per cent, returning to a recent two-year low.
Additionally, MSCI’s index of Asia-Pacific equities outside Japan fell nearly 2 per cent to its lowest level since the beginning of 2020, due to US export restrictions intended to hinder the development of Chinese technology.
Chipmakers and China tech firms were particularly hard hit. For example, Taiwan’s Semiconductor Manufacturing Company lost more than 8 per cent.
Trading in US stock futures was expected to open lower on Wall Street.
“We are headed for a severe economic downturn, and central banks are tightening policy, which is a bad combination for the markets,” Berenberg chief economist Holger Schmeiding told Reuters. “When do markets start looking beyond that? The next two months may still be tough.”
The release of US inflation data on Thursday could pave the way for another significant rate hike by the Federal Reserve in November, and tensions are already rising.
“Inflation is stubborn, and the Fed needs to go beyond what the market expects,” Tai Hui, chief Asia-Pacific market strategist at JPMorgan Asset Management, told Reuters.