The Sensex on Monday sank 872 points following a global selloff on renewed concerns over growth and interest rate hikes by central banks. The 30-share BSE index ended in the red for the second consecutive session, down 1.46 per cent to close at 58773.87. Similarly, the broader NSE Nifty declined 267.75 points, or 1.51 per cent, to 17490.7.
In two sessions, the Sensex crashed 1524.13 points or 2.52 per cent. Some analysts welcomed the correction as stock prices had run up too fast in recent sessions amid the headwinds of inflation and the possibility of some of the global economies slipping into a recession. The selling has pulled down the market capitalisation of BSE-listed firms by almost Rs 6.58 lakh crore in two sessions, with markets reacting adversely to the release of the minutes of the meeting of the US Federal Reserve held on July 26 and July 27 that indicated sharp rate hikes in the future to combat inflation.
Moreover, the US dollar and bond yields have strengthened. The dollar index (DXY) is at a five-week high and trading higher at 108.46 at the time of writing this report. The benchmark 10-year bond yield was soft at 2.98 per cent after crossing the 3 per cent mark during intra-day trades.
“Consolidation was triggered in the market in anticipation of tighter monetary policy by the Fed and worries over a slowdown in global economic activity. The current risk-reward is not favouring investors as the Nifty 50 is now trading at a premium valuation of 21.5 times P/E (1 year forward basis), above the long-term average. Rising dollar index and higher US 10 year bond yield act as the near-term headwinds for the market,’’ Vinod Nair, head of research at Geojit Financial Services.
After the hawkish minutes, investors will search for cues at the annual Fed meeting in Jackson Hole, Wyoming, this week for guidance on rates. Economists are pencilling in at least a 50 basis points hike in the interest rate at the FOMC meeting next month. Meanwhile, China again cut a key interest rate to boost its economy that has been hit by Covid curbs and problems in its real estate sector.
The Chinese central bank brought down its target rate for a fiveyear loan to shore up weak housing sales. In the Sensex pack, Tata Steel was the biggest laggard falling 4.50 per cent. It was followed by Asian Paints, Wipro, Sun Pharma, Larsen & Toubro, Bajaj Finance, UltraTech Cement and Bajaj Finserv, which fell up to 3.82 per cent.
Data showed foreign portfolio investors were net sellers of about Rs 454 crore. Meanwhile, the rupee managed to recover losses and close with a fall of 9 paise at 79.87 after opening at 79.90 and touching a low of 79.92 against the dollar. In the bond markets, yields on the benchmark 10-year paper were flat at 7.27 per cent.
