Indian equity benchmarks fell on Thursday, tracking a broader risk-averse sentiment that later pushed Asian markets and world stocks to near 2-year lows after an overnight sell-off on Wall Street ahead of US inflation data. pushed on.
The BSE Sensex index fell 390.58 points to end at 57,235.33, and the broader NSE Nifty index fell 109.25 points to 17,014.35 on Thursday, reversing a sharp rally in the previous session that ended a three-day losing streak.
Weak equities sent MSCI’s 47-nation world index down for the seventh day in a row, continuing the downward trend in recent days for global markets. There was little sign of relief in Asia or Europe.
The STOXX 600 index for Europe as a whole was down 0.6 percent, falling for the seventh consecutive session. Markets are concerned that a rapid rise in global interest rates could trigger a recession, which is why it has fallen by about 4.3 percent in the past six days.
Paul O’Connor, head of multi-asset at Janus Henderson Investors, told Reuters that investors’ questions are whether central banks like the Fed are approaching the end of their interest rate hikes.
“Are we there yet? My feeling is we’re pretty close to pricing in peak rates, but on the growth story I think there’s probably still a lot of downgrades to come,” he said.
It takes a year to 18 months for interest rate hikes to be fully effective. As a result “it is quite plausible that around the end of the year, central banks announce a pause … the labor market will cool down and the housing market will collapse.”
Hope’s views were fueled by a rise in US Emini stock futures, which came after another overnight drop in the S&P 500.
“I’ve been worried for some time now,” Tom Nash, fixed income portfolio manager at UBS Asset Management in Sydney, told Reuters. “The risk of an over-tightening episode and the risk of some crash in the financial markets is greater than I can remember.”
Trades are likely to be dictated by US inflation data to be released later on Thursday as it could affect how far the Federal Reserve’s tough policy cycle will go.
But investors noted that the Fed has already raised rates for the next month by about 75 basis points and that most markets have experienced significant declines recently.
“Given the negative bond and equity moves over the past month, the prospect of reversing all of these moves on a softer CPI is significant,” Adam Cole, chief currency strategist at RBC Europe in London, wrote in a research note.
Bloomberg reported that the correlation between the S&P 500 and Citigroup Inc.’s widely-watched surprise index for the US economy has hit its lowest point since 2015, fueled by aggressive policy tightening and predictions of additional tightening to come. has resulted.