Stock indices fell for the second consecutive session, led by the massive selling in global stocks and commodities as the prospect of sharp monetary tightening by the Federal Reserve pushed investors to safe haven assets and pushed the dollar index to another record high.
The 30-share BSE Sensex index closed down 168.08 points to close at 59028.91, and the broader NSE Nifty-50 index fell 31.20 points to close at 17,624.40.
IndusInd Bank, Mahindra & Mahindra, Maruti, Bharti Airtel, State Bank of India, Tata Steel, ICICI Bank and HDFC were among the biggest latecomers in the Sensex package.
Among the winners were UltraTech Cement, Tata Consultancy Services, Sun Pharma, Wipro and Bajaj Finance.
The long-running uptrend for Indian stocks is likely to be over, as evidenced by the poor performance of equity benchmarks so far this month, driven by the broader economic gloom.
“Markets slipped into negative territory during the session tracking weak global signals, as uncertainty about a possible global recession due to a potential interest rate hike continued to weigh on sentiment,” said Shrekant Chauhan, head of retail equity research at Kotak Securities.
Markets took more losses during Asian trading as data showed Chinese export growth slowed in August, in addition to stronger-than-expected US services data overnight, boosting bets on strong Fed rate hikes.
Bloomberg reported that while global stocks are on their worst path since the European debt crisis a decade ago, strategists at Goldman Sachs Group Inc. They are among those who have warned of the possibility of further sale.
The MSCI All Country World Index is going through its longest losing streak since 2011 and is erasing a quick bounce from mid-June that Goldman’s team led by Peter Oppenheimer described as a “bear market rally”.
The strategists wrote in a note that the pullback is not unusual for the experience of previous decades. “We expect further weakness and rough markets before a decisive bottom is established.”
The MSCI World Stock Index is down 0.3 percent on the day. The largest index of Asia-Pacific shares outside Japan has fallen to its lowest levels last seen in the wake of the 2020 pandemic.
The yield on US 30-year Treasuries was almost at its highest level since 2014 during a bond sell-off made worse by betting the Federal Reserve would raise interest rates by another 75 basis points to combat hyperinflation.
In addition, traders were preparing for Thursday’s interest rate decision from the European Central Bank, which could result in a move of the same magnitude.
“Government bond yields across the board are rising, and that’s putting pressure on stock markets,” David Madden, market analyst at Equiti Capital, told Reuters.
“This also comes at a time when fears of a global economic slowdown are growing, and bond traders anticipate further rate hikes,” he added.
Europe’s Stoxx 600 Index fell 0.4 percent, with the mining and energy sectors leading the losses, while the S&P 500 and Nasdaq 100 futures reversed losses to post slight gains.
Markets are dealing with a crippling energy crisis in Europe and the COVID-19 shutdown in China, as well as tighter monetary policies and an unstoppable dollar. Given the headwinds of the global economy, concerns are growing about the company’s earnings outlook.
“Many investors are walking on eggshells,” Kristina Huber, chief global market strategist at Invesco, said on Bloomberg TV.
“The real problem is that it could be a two-way punch. We can see the Fed continue to hit the economy with massive rate hikes, let’s say 75 basis points, and then, of course, we get bearish earnings reviews which are important.”
In commodities, crude oil prices fell to their lowest levels since January, and iron ore continued to decline.