NEW DELHI: It was another rough day for D-Street investors as benchmark indices registered their worst intra-day drop since March 2020 on Thursday. This will be the most volatile year for the markets in more than a decade, as uncertainty about the impact of aggressive rate cuts is easing stock prices.

The 30-stock Sensex package plunged 1,416.30 points or 2.61 percent at 52,792.23. Its broader peer NSE Nifty lost 430.90 points or 2.65 percent to mark its worst day since February 24, closing near 15,809.40.

Weak quarterly results elsewhere, including internet giant Tencent in China, added fuel to the fire.

On Thursday, domestic stocks eroded nearly Rs 6.36 lakh crore from investors’ pot. Data showed that the BSE market cap fell by 6.3 lakh crore to Rs 249.40 lakh crore from Rs 255.7 lakh crore a day ago.

ITC was the only stock in the Sensex package that ended with decent gains. Shares ended 3.43 percent higher after the company released March quarterly results on Wednesday. Dr. Reddy’s and Power Grid ended the session marginally positive.

“Recent earnings reported by US retailers have reflected the heat of high retail inflation resulting in Wall Street’s defeat,” said Vinod Nair, Head of Research at Geojit Financial Services.

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He added that continued offloading by foreign investors and mounting fears of an economic slowdown have wreaked havoc on the domestic market.

All sector indices also closed the session with deep cuts. The volatility index rose more than 10 percent and ended near a two-month high.

Nifty’s IT index was the biggest loser of the sub-indices, with a 5.8 percent drop. IT majors Infosys, Tech Mahindra, and Wipro were the biggest laggards on the Nifty 50, with more than 5-6 percent each.

“In this highly volatile market, investors can focus on sectors such as FMCG, Pharma, Capital Goods, and manufacturing whose long-term valuations are moderate and reasonable,” said Nair.

Heavy falls in markets followed on Thursday on Wall Street’s worst day since mid-2020, as sharp warnings from some of the world’s largest retailers underlined how hard inflation is biting.

These key factors weighed on the market today: Retailers hit Wall Street. Weak results from US retailer Target have raised concerns about inflation affecting corporate profits worldwide.

A one-day drop of 25 percent in shares of US retailer Target after dismal results and commentary, and a consistent decline in larger rival Walmart, was a reminder that ignoring inflation is not an option now and that sharp write-downs worldwide are a real threat. a possibility.

The US Fed has said it would raise US interest rates until there is “clear and convincing” evidence that inflation is declining. But rising interest rates could also hurt US demand and lead to a recession in the world’s largest economy. The Dow Jones fell 3.6 percent, while the Nasdaq fell 4.7 percent overnight. The S&P 500 lost 4.04%. The three indices were on track to extend a streak of at least six weekly losses.

Tencent magnifies Asian wounds. If the overnight drop in US stocks was bad, a sharp decline in shares of Chinese internet giant Tencent was worse. Chinese Tencent’s profit in March has halved from a year ago, and revenues have stagnated due to the impact of Covid-19 lockdowns in that country.

On Thursday morning, Hong Kong fell 2.5 percent, while Tokyo fell 2 percent. The markets in Taiwan and Korea fell to 2 percent.

Frontloading rate hike The minutes of the recent MPC policy review on Wednesday suggested advanced rate hikes. Nomura India expects an increase of 50 basis points in June from 35 basis points earlier. “More accelerated rate hikes appear to be on the way, with the MPC eager to push the repo rate to pre-pandemic levels of 5.15 percent (from 4.40 percent) soon,” Nomura said. Nomura sees a 35bp rate hike in August, followed by a 25bp rate hike in October, December, February, and April. It said risks are on the upside both in June (up 75 basis points is life) and in the final yield forecast (down 6.25 percent).

Record low rupee & foreign outflow A record low rupee weighs on foreign flows to the country. Against the greenback, the partially convertible rupee stood at 77.6780, trading near its all-time low.

A weakening rupee makes investing in Indian equities unattractive to foreign investors. The outflow of foreign stocks in May has crossed the mark of Rs 30,000 crore. For 2022, they stood at Rs 1,57,556 crore in 2022 so far.


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