Stock Market India: Sensex, Nifty crash and mark losses for three days in a row
Indian equity benchmarks crashed over 1.5 per cent on Tuesday, marking the third straight day of losses, taking cues from global stocks heading towards 2-year lows on anxiety over quickly rising interest rates, an escalation in the Ukraine crisis, and China stepping up pandemic preparations weighing on sentiment.
The BSE Sensex index tumbled 843.79 points to end at 57,147.32, and the broader NSE Nifty index fell 257.45 points to close at 16,983.55.
IndusInd Bank, Nestle India, Tata Steel, Tech Mahindra, Infosys, Dr. Reddy's, Titan, and Reliance Industries were the major laggards in the 30-share Sensex pack.
Axis Bank and Asian Paints, on the other hand, saw gains.
In the previous session, both equity benchmarks closed lower but had pared steep losses from earlier on Monday.
Following a fourth consecutive decrease in US stocks, shares fell in Asia, and the dollar rose sharply amid ongoing worries that rising interest rates and geopolitical threats will hamper global economic growth.
"Our expectation for the world economy to enter recession next year is consistent with further gains in the dollar," said Commonwealth Bank of Australia strategist Carol Kong.
The World Bank and International Monetary Fund (IMF) heads warned of a growing threat of a global recession as industrialised economies slow and greater inflation drives the Fed to keep hiking interest rates, increasing the debt strain on developing nations.
"A recession is very possible - our subjective probability over the next year is 35 per cent - but we think it would require additional shocks," Jan Hatzius, Chief economist at Goldman Sachs Group, wrote in a note, according to Bloomberg.
Renewed upward pressure on fuel prices is an area to watch, and Goldman also sees "a small but growing risk of an unnecessary monetary policy overshoot if Fed officials focus too much on lagging inflation indicators."
On Tuesday, world stocks headed back towards their lowest levels in almost two years on global recession risks, with European markets starting the day general weaker.
Emerging market equities have fallen to their lowest level since April 2020 and are on pace to have their worst year since the global financial crisis of 2008, with a near 30 per cent decline thus far.
The tone is shaky ahead of Thursday's US inflation data, and if the figure comes in higher than expected, there may be good grounds for another 75 basis-point rate hike.
Despite the possible impact on economic growth, Fed members have thus far shown little indication that they are in the mood to pause the rate-hiking cycle.
"There is evidence inflation is stabilising, but the question is whether inflation has peaked or is just pausing before another leg higher," said Michael Hewson, chief analyst at CMC Markets in London. "Rates markets are reflecting that uncertainty."
The MSCI world stock index was down 0.5 per cent, returning to the recent two-year lows.
Additionally, due to US export restrictions intended to impede the development of Chinese technology, MSCI's index of Asia-Pacific equities outside of Japan dropped about 2 per cent to its lowest level since early 2020.
Chipmakers and China tech firms were particularly hard hit. For instance, Taiwan's Semiconductor Manufacturing Co had a more than 8 per cent decline.
According to trading in US stock futures, Wall Street was expected to open lower.
"We are heading toward a serious economic downturn, and central banks are tightening policy, which is a bad combination for markets," Holger Schmieding, Chief Economist at Berenberg, told Reuters. "When do markets start to look beyond this? The next two months could still be rough."
The release of US inflation data on Thursday might pave the way for another significant rate hike from the Federal Reserve in November, and tensions are already fraying.
"Inflation is stubborn, and the Fed needs to go beyond, above beyond, what the market is expecting," Tai Hui, Chief Asia-Pacific Market Strategist at J.P. Morgan Asset Management, told Reuters.
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