The Indian equity benchmarks extended losses for the third straight day on Tuesday as tensions in West Asia continued to weigh on investor sentiment.
After declining by more than 1 per cent each in the previous two sessions, the S&P BSE Sensex and National Stock Exchange Nifty 50 declined by 0.6 per cent on Wednesday. While the Sensex lost 456 points to end the session at 72,944, the Nifty 50 slumped 125 points to 22,148. However, smallcap indices bucked the trend with the Nifty Smallcap 100 gaining 0.75 per cent on Tuesday. The Nifty Midcap 100 closed almost flat.
The West Asia flare-up remains an overhang for the market as Israel has said it will retaliate to Iran’s weekend drone and missile attack, even as officials in the US and Europe push to avoid a tit-for-tat escalation.
Since closing at their record high levels on Thursday, the Nifty 50 has corrected 2.7 per cent in the past three sessions, while the Sensex is down 2.8 per cent.
“Concerns arose following stronger-than-anticipated US retail sales, amplifying the assumption that the US Federal Reserve (Fed) might delay rate cuts, leading to a notable uptick in the dollar index and US bond yields. The information technology (IT) sector saw the most significant decline, primarily due to expectations of earnings being affected by weak discretionary spending in the US and muted domestic fourth-quarter results,” said Vinod Nair, head of research at Geojit Financial Services.
In the Nifty 50 pack, three of the five stocks that corrected the most were IT shares. Infosys and LTIMindtree declined by 3.7 per cent and 3.2 per cent, respectively, on Tuesday. Wipro ended the session down 2.4 per cent. HCLTech went down 1.9 per cent.
Amid global headwinds, FPIs have stepped up their selling. On Tuesday, they sold shares worth Rs 4,468 crore, extending their three-day selling to nearly Rs 18,000 crore.
The continued selloff by FPIs pushed the rupee to a record low of 83.54 against the US dollar on Tuesday.
Industry experts say the rising bond yields in the US are currently the main pain point for the equity and currency market and are the reason behind the FPI selloff.
Following the recent hotter-than-expected US inflation data, the first rate-cut expectations from the Fed have been pushed to December from June. This has led to the repricing of assets, with the 10-year US bond yield hardening from 4.2 per cent at the start of the month to nearly 4.7 per cent at present.
Typically, US bond yields and risky assets move in opposite directions.
“The acceleration of inflation this year makes a cut prior to December challenging in our view,” said economists at Bank of America in a note.
“More upside surprises to inflation could push out Fed easing into 2025, removing cuts from 2024 altogether. A key issue in this regard is whether housing inflation will slow as expected or remain extremely sticky. We see risks to the timing of cuts as skewed towards a later start, even if the Fed is eager to cut rates this year,” the note added.
First Published: Apr 16 2024 | 9:37 PM IST
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