Indices tank 2.7%; Nifty ends at 11-month low

Mumbai: Indian equities tumbled 2.7% on Monday with the Nifty closing at its lowest in almost 11 months as investors fretted that the US Federal Reserve could resort to sharper interest rate increases after May consumer inflation in the world’s largest economy hit a four-decade high. The rush to safe-haven assets caused the dollar to spike further, prompting overseas fund managers to step up their selling of local stocks. The rupee hit fresh lows.

The NSE Nifty declined 427.40 points or 2.64% to close at 15,774.40, its lowest closing since July 30, 2021. The BSE Sensex dropped 1,456.74 points or 2.68% to end at 52,846.70, its lowest closing since May. Out of the 50 Nifty components, only two-Nestle and Bajaj Auto-ended higher.

Analysts said the Nifty’s close below the 15,800-16,000-zone has increased the possibility of the index declining around 2-4% in the near term.


“The breach of 16,000 has opened up the likelihood of the Nifty going to 15,500 and even 15,200,” said Rajesh Palviya, head, technicals and derivatives, Axis Securities. “It will continue to be a sell-on-rise market with the new resistance being 16,000.” The Nifty has fallen almost 9.2% so far in 2022 and is down 14.6% from its all-time high in October 2021.

The sell-off was global with markets from Tokyo to London facing the brunt of heightened risk aversion triggered by the higher-than-expected US inflation reading on Friday. Asian markets dropped 1-4% and the Stoxx Europe 600 declined 2.3%, while bond yields surged further amid concerns over the implications of likely aggressive steps by Fed and other central banks to curb prices on economic growth.

“The yields on US two-year treasuries have gone past 3% and now are trading at the highest level since 2007, and its gap with the 10-year yields is now less than 5 basis points, making a case for a sharp downturn in the equities,” said

CEO Sandeep Bhardwaj.

The surge in US treasury yields of late suggest that market participants are expecting oversized rate increases by the US central bank in September. The rate-setting meeting on Wednesday will likely give investors some hints on the Fed’s interest rate roadmap. Against earlier forecasts of a 50-basis point rate hike in the June meeting, the expectation is that it will be lifted by 75 basis points on Wednesday.

“It’s certainly hard to see much upside for the stock market other than trading rallies under the current circumstances,” Ed Yardeni, founder and chief investment strategist at Yardeni Research, said in a note to clients. “Sentiment remains very bearish, which in the past was bullish from a contrarian perspective.”

A renewed flare-up of Covid cases in China have added to the jitters. Though oil prices declined on expectations Beijing would impose fresh restrictions to control the virus spread, the drop was not enough to rekindle optimism. Brent crude futures were down 1.6% at $120.45 a barrel at press time.

In India, foreign portfolio investors (FPI) net sold shares worth Rs 4,164 crore on Monday, taking their sales tally for June so far to over Rs 23,000 crore. In May, they pulled Rs 37,664 crore out of stocks. Since January the outflow is over Rs 1.86 lakh crore.


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