Bears tightened their grip on the Indian markets on Monday with the Sensex and Nifty falling over 2.5 percent each as fears of more aggressive interest rate hikes by the US Fed spooked investors after the US inflation hit a 41-year high in May. The Sensex ended 1,457 points lower at 52,847 while the Nifty lost 427 points to settle at 15,774.
US inflation surged 8.6 percent last month from a year earlier, faster than April's year-over-year increase of 8.3 percent the Labor Department said Friday. The new inflation figure, the highest since 1981, will heighten pressure on the Federal Reserve to continue raising interest rates aggressively.
Amid this, only 8 stocks from the BSE100 index were trading in the green in intra-day deals today. The remaining 92 gave negative returns on the back of the overall weak market sentiment.
Broader markets, too, tanked with the Nifty Midcap100 and Nifty Smallcap100 down 3-4 percent. All sectors were also in the red with Nifty IT dragging the most, down 4 percent, followed by Nifty Metal, Nifty Bank, and Nifty Realty down over 3 percent each.
On the BSE100 index, Adani Green was the top gainer, up around 2.3 percent amid weak markets. Meanwhile, Marico, Pidilite, and Nestle added between 0.5-1 percent each. ICICI Lombard, Seimens, PI Industries and Bajaj Auto were also in the green.
However, among losers, banking and financial stocks lagged the most. Bajaj Finserv lost the most, down nearly 7 percent, while Chola Invest, Adani Enterprises, Bajaj Finance, Piramal Ent and Tata Motors lost over 5 percent each. IndusInd Bank, Tech Mahindra, Bandhan Bank, Tata Power and Hindalco also shed over 4.5 percent each. 4 percent each.
On Sensex as well, only Nestle, gained while all the remaining stocks declined.
Market cap of BSE-listed firms lost around ₹5.6 lakh crore with today's fall to ₹246.14 lakh crore today against ₹251.81 lakh crore market cap in the previous session. After today's crash, Sensex is down 9.36 percent and Nifty has declined 8.98 percent in 2022 YTD.
Most analysts expect the near-term volatility to remain in the markets till some clarity emerges regarding interest rates. They advise caution to investors before making any decisions.
"The near-term market trend is weak. The May US inflation print at 8.6 percent against the market expectation of 8.3 percent is likely to turn the Fed more hawkish with a series of 50 bps rate hikes taking the terminal rate by mid-2023 above 3.5 percent. Such a scenario would be negative for risky assets like equity, particularly in the context of declining global growth. The Indian market will stabilize only when the US market stabilises. Therefore, investors may wait and watch till clarity emerges on the market trend," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He advises long-term investors can use the dips in the market to buy high-quality economy-facing stocks like capital goods, banking, telecom, and export segments.
Meanwhile, Hemang Jani, Head Equity Strategy, Motilal Oswal Financial Services said, "equity markets across the globe are witnessing a sell-off after US May inflation data accelerated to four decades high which raised concerns about aggressive rate hikes by US Fed in the upcoming monetary policy meet due this Wednesday. On the domestic side, India’s inflation data is due today on account of which nervousness is likely to be seen in the market. Apart from these, the market would continue to remain cautious ahead of various central bank meetings this week.”