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By Ujjval Jauhari
The Sensex and the Nifty closed 1.56% and 1.63% lower, tracking global peers, on the back of concerns over economic growth due to rising inflation, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd. Photo: iStock

The Sensex and the Nifty closed 1.56% and 1.63% lower, tracking global peers, on the back of concerns over economic growth due to rising inflation, said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd. Further, higher bond yields, as well as continued selling by foreign institutional investors, added to the pressure, added Khemka.

Market Trend

“The single important factor roiling global equity markets is the re-emergence of inflation as a major threat and the market’s scepticism over the central banks’ ability to contain inflation without triggering a sharp economic slowdown," said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services.

Asian indices such as Taiwan, Shanghai Composite and Hang Seng all ended 1.72-3.81% lower. Only Jakarta Composite and Nikkei could manage some gains—of 0.45%-0.69%.

After rate hikes by the Reserve Bank of India and the US Fed, hawkish commentary and negative economic growth outlook by the Bank of England spooked global markets. Global markets tumbled 2-3% after interest rate hikes to curb rising inflation, thus hitting economic growth, said Khemka. Bank of England raised interest rates to their highest since 2009 at 1% on Thursday.

Investors worried the interest rate hikes may negatively impact emerging markets.

“A hawkish Fed and rising global inflation narrative will compel central banks to persist with the normalization of monetary policies. As a result, a higher cost of capital will somewhat dilute earnings momentum in EM economies like India, where the impact of higher input costs and rising interest rates will likely be more palpable in Q2 FY23," said Niyati Khandelwal, head-sales and trading-institutional equities, Yes Securities.

Selling by FIIs is expected to accelerate as bond yields in the US begin to offer better returns at higher credit ratings, which will eventually weaken the Indian financial market, said Vinit Bolinjkar, head of research at Ventura Securities Ltd.

FIIs continue to remain net sellers, having sold 1.34 trillion worth of equities in 2022, till 5 May. A weaker rupee does not bode well for their returns either.

Bond yields, too, further inched up from 7.40% on Thursday. Edelweiss Asset Management had said that bond market participants expect RBI to raise the repo rate to 5.15%, a pre-pandemic level, quickly, and aim to complete the policy rate normalization process. It said the repo rate will reach there by December.

Rising crude prices are adding to the inflation concerns as Brent moved up to $114 a barrel levels on Friday. Notably, Brent had softened to near $101 a barrel levels in the last week of April. Oil prices are rising higher on persistent concerns over the tightness of global supply, said experts.

Markets selling intensified further on Friday as rising crude oil prices reignited fears that inflation would pose a major challenge going ahead, said Amol Athawale, Deputy vice-president-Technical Research, Kotak Securities Ltd

“Additionally, a stringent lockdown in China has severely impacted global supply chains and also remains a key concern of the markets. Asian stocks fell on worries about the hit to growth from China’s zero-covid policy," said Deepak Jasani, head of retail research at HDFC Securities. The US dollar hit 20-year highs and world stocks fell towards their lowest in over a year on Friday as markets expected more US interest rate rises, he added.

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Dive Deeper:
Bull vs bear: Top 5 triggers that may dictate stock market this week
Bull vs bear: Demand for US dollar is expected to continue and Dollar Index may go up to 105 to…
Markets Weekly Tips: Here's what to focus on while trading this week
This week, markets are seen to perform in a range-bound manner with economic data such as IIP, inflations, and key…
Nifty outlook for the week May 9-13: Key factors and levels to watch out for
Stock market traders can maintain a neutral to mild negative bias and look for sell-on-rise opportunities, say analysts
Sensex falls 867 points as realty, financial shares plunge; Nifty ends below 16,450
NEW DELHI: Equity indices tumbled on Friday as investors fretted that fast-paced interest rate hikes to tame surging inflation would…
One subscription that gives you access to news from hundreds of sites
Markets crash amid global rout; Sensex dives 867 points
Equity benchmarks nosedived on Friday, with the Sensex crashing 866.65 points to close below the 55,000-mark amid a sell-off in…
Market mayhem wipes out ₹7.73 lakh cr of investor wealth in two days
The two-day slump in equities eroded ₹7,73,582.29 crore from the market capitalisation of BSE-listed companies, which now stands at ₹2,51,91,307.08…
Get all your news in one place