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Mumbai: Indian benchmark indices ended 1.6% down on Friday, posting their worst week since November, tracking a global selloff as investors expect that aggressive tightening by central banks to combat inflation may take a toll on growth.

On Thursday, the Bank of England sent a stark warning that Britain risks a recession and inflation above 10% as it raised interest rates to their highest since 2009. The US Federal Reserve hiked rates by 50 basis points on Wednesday. The Fed’s decision was preceded by the Reserve Bank of India announcing a surprise repo rate hike of 40 basis points. Overnight, US stock indices plunged sharply, ending 3-5% down, on concern that the US Federal Reserve’s interest rate hike announced earlier this week would not be enough to tame four-decade-high inflation.

sensex

‘Too Many Factors at Play’

Erasing the previous session’s gains, the Sensex dropped 866.65 points or 1.6% to 54,835.58 and the Nifty closed 271.40 points or 1.6% lower at 16,411.25. The Nifty and Sensex ended down nearly 4% for the week, their fourth consecutive weekly fall. Asian markets ended down 1-4%, also weighed down by growth concerns from China’s zero-Covid policy.

“The market seems to be in a no man’s land,” said Nilesh Shah, managing director, Kotak Mutual Fund.

“There are too many factors like oil, foreign selling, retail buying, US Fed and now RBI’s rate hikes that are pulling the market from both sides. We will continue to witness this sharp volatility till the intensity of these factors wears out.”

Bajaj Finance lost nearly 5% to end as the biggest casualty on the Sensex while Axis Bank, Bajaj Finserv, Nestle, Wipro and HDFC ended 3-4% lower as the other top laggards on the 30-share index. During the day, Sensex and Nifty fell as much as 2%.

“Markets are readjusting to these interest rate increases and central bankers are becoming more hawkish,” said Vinit Sambre, head of equities, DSP Investment Managers. “There could be some more nervousness because of the expectation of growth slowdown. Investors can have some cash and gradually deploy it over the next one quarter or so.”

The Nifty is down about 9% from the year’s high of 18,114.65 on April 8.

“The short-term trend of Nifty continues to be negative. Any upside from here could encounter strong resistance around 16,650 levels,” said Nagaraj Shetti, technical research analyst at HDFC Securities. “Eventually, Nifty could decline from the highs and reach down to the next support of 16,200 in the near term.”

India VIX, which measures the market’s perception of risk in the near term, gained 4.7% to 21.25. The broader market ended with steeper losses–the Nifty Midcap 100 and the Nifty Smallcap 100 dropped 1.8% and 2.5%, respectively.

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