Dalal Street seemed to be in a bear grip as the benchmark indices continued the southward journey for the fourth consecutive session on Monday, in line with global equities amid growing recession fears in the wake of aggressive policy to tame inflation. Investors have lost ₹13.3 lakh crore of wealth in the last four sessions as the total market capitalisation of the BSE-listed companies plunged from ₹283.42 lakh crore on September 20 to ₹270.11 lakh crore at the end today.
The market witnessed broad-based selling as investors assessed the increased likelihood of a recession after the US Federal Reserve raised interest rates by another 75 basis points for the third consecutive time last week and warned of further increases. Traders also turned jittery ahead of the Reserve Bank of India (RBI’s) policy meeting this week, with the central bank widely expected to raise the key rate by 50 bps, in sync with global peers.
In line with domestic bourses, the rupee ended at a fresh record closing low at 81.62 against Friday’s close of 80.99. The domestic currency hit a new all-time low of 81.66 against the dollar in the intraday trade amid strong demand for the greenback following a rate hike by the U.S. central bank.
“The soaring dollar as a result of aggressive monetary tightening, slowing economic growth and rising demand from cautious investors are causing turbulence in the global equity market. This is creating mayhem in the domestic market led by weakening INR, elevated bond yields, and pessimistic trends of Asian peers. Only the IT sector, which exhibited the weakest performance in the last 1 year, defied the trend in anticipation that the global recession is mostly factored in the price and are trading at reasonable valuations,” says Vinod Nair, Head of Research at Geojit Financial Services.
Extending its losing streak for the fourth straight session, the S&P BSE Sensex plunged 954 points, or 1.64%, to close at 57,145 levels. The 30-share benchmark opened at 57,525, against the previous closing price of 58,099, and declined as much as 1,060 points to hit an intraday low of 57,038 during the session.
In a similar trend, the broader NSE Nifty settled 311 points, or 1.8%, lower at 17,016, with 41 of its 50 constituents flashing in the red. During the session, the index dived 349 points to slip below the 17,000-mark to touch a low of 16,978.
The Sensex has fallen 2,575 points, or 4.3%, in the last four trading days, while the Nifty50 has lost 800 points, or 4.5%, during the same period. With today’s fall, the Sensex has corrected 3.44% in CYTD 2022 (calendar year to date), and the NSE Nifty has shed 3.46% during the period under review.
In line with the benchmark indices, the broader market also saw a sharp correction on Monday, with the midcap and smallcap indices falling 2.84% and 3.33%, respectively. Overall the market width was negative, with around 3,000 stocks falling on the exchange, while nearly 700 stocks advanced.
Maruti Suzuki India, the country’s largest car maker, was the biggest loser on the Sensex pack with a loss of 5.49%. It was followed by Tata Steel, ITC, Axis Bank, and NTPC which dropped up to 4.2%.
On the other hand, HCL Technologies topped the gainers’ chart by rising 1.28%, followed by Asian Paints, Infosys, UltraTech Cement, and Tata Consultancy Services, among others. Infosys and TCS rebounded strongly after hitting their respective 52-week low in intraday trade amid fear that rising inflation and higher interest rates would have a major impact on tech spending in the United States and European regions.
Meanwhile, Harsha Engineers International made a strong debut on the domestic stock exchanges on Monday, despite weak trends in the broader markets. The shares of the engineering company were listed at a premium of 34.5% at ₹444 on the Bombay Stock Exchange (BSE), against the upper price band of the issue price of ₹314-330 apiece. On the National Stock Exchange (NSE), the stock opened at ₹450, up 36.3% against the initial public offering (IPO) price. Extending listing gains, the stock ended the first day of trade at ₹485.90, up 47.2% on the BSE.
On the sectoral front, IT space was the solo gainer (0.14%) as the index recovered strongly amid weakness in the rupee. The Indian currency hit a fresh low of 81.55 per dollar today after breaching 81.50 levels on Monday amid strong demand for the greenback on fears of a global recession due to continued hikes in interest rate by central banks across the world. The record rally in the U.S. dollar is likely to benefit the earnings of the IT companies as the majority of their revenue comes in dollar terms.
“It seems that Indian markets are now catching up with global markets which have been soft for a month now. The sell-off which began last Friday continues today with the mid/small cap stocks particularly taking it on the chin. With today’s fall, the Nifty return CYTD 2022 has turned negative,” says Vineet Bagri, Managing Partner, TrustPlutus Wealth.
“Investors are cautious on the outlook for equity markets globally due to the increasing assertiveness of global central banks on implementing interest rate hikes to tame rising prices. Thus central banks are likely to prioritise inflation control vis a vis economic growth thus raising the risks of a global recession,” Bagri adds.