Markets crash 2% as US inflation fuels fears of Fed hike

Mumbai: Indian equities tumbled on Thursday, extending losses to the fifth day, following Wall Street‘s lead overnight as persistently hot inflation in the US continued to fan fears of aggressive interest rate increases that could stall economic recovery. The Nifty fell below 16,000 – for the first time after two months – with the rupee’s weakness against the dollar resulting in continued foreign outflows.

The NSE Nifty dropped 359.10 points, or 2.22%, to end at 15,808. The BSE Sensex fell 1,158 points, or 2.14%, to close at 52,930.31. Across share categories on the BSE, 2,711 fell, while 654 gained. Shares of lenders led the sell-off, while software exporters such as Wipro, HCL Technologies and TCS managed to eke out gains.

A silver lining for the market was that the Nifty managed to close above the support of 15,800, recouping some losses from the day’s low of 15,735.75, at a time when money managers and analysts perceive stocks to be oversold.

“The markets are looking a bit oversold and at some point, they will see a bounce but we need to see if those bounce-backs get sold into,” said Andrew Holland, CEO, Avendus Capital Alternate Strategies.


VIX soars 6.4%

“Markets will remain volatile and protecting capital is a strategy in itself for the next one or two months. Investors feel it has to get a little worse before it gets better.” The Nifty is down nearly 12.7% from the 2022 high of 18,114.65 it touched on April 8.

The Nifty’s resolve to stay above 15,800 and then 15,671, hit on March 8, could be tested in the coming days as the Volatility Index, or VIX, soared 6.41% to 24.27, suggesting traders see more risks to the market in the near term.

“It is not just one thing which is impacting markets but multiple variables, be it geopolitical issues surrounding Ukraine war, oil prices, inflation, interest rates in the US and India,” said Nilesh Shah, MD, Kotak Mahindra AMC. “It can’t be said that the market will only go down. It can go either way, based on how these events play out.”

Foreign portfolio investors dumped shares worth Rs 5,255.75 crore on Thursday, while their domestic counterparts were buyers to the tune of Rs 4,815.64. The recent decline in the rupee against the dollar has accelerated outflows amid the broader flight to safe-haven assets like the US currency. The local currency hit a record low of 77.63 against the dollar in midday trade on Thursday.

In May so far, foreigners have net sold to the tune of Rs 28,198 crore. The net outflow has been Rs 1.59 lakh crore since January.

On Thursday, the dollar rose to a two-decade high after April’s consumer inflation in the US increased at 8.3%.

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