Markets Bleed: Nifty, Sensex fall more than 1% as fears of recession, worsening COVID situation and negative global spook investors.
Indian share market extend losses. BSE Sensex was trading with a loss of 800 points, or 1.3% at 60,000, while broader Nifty was down over 200 points or 1.4%.
The Indian share market, which has been defying trends in global peers until recently to outperform, saw a sharp correction on Friday. Benchmark indices were trading deep in red with BSE Sensex falling over 800 points to trade below the 60,000 level and NSE Nifty 50 tanking 200 pts to give up 17,900 level. Except Nifty Pharma index, which held marginal gains, all sectors were trading in red with Nifty Media, Nifty Metal, Nifty Realty, and Nifty PSU Bank indices falling up to 4%. While weak global markets put a pause on Indian equities’ Santa Claus rally, renewed Covid-19 fears and recession threats in the near term spooked Dalal Street bulls ahead of Christmas.
Here’s what is dragging markets today
Weak global markets: Global equity markets have been witnessing selling pressure lately, dampening the festive spirit. US markets reversed their positive trend on Thursday to close the day with losses. The Dow Jones ended with a downside of over 1% while the cut was sharper in the Nasdaq at 2.18%. The benchmark S&P 500 is on track for a 19.8% annual drop, which would be its biggest since the 2008 financial crisis. All Asian indices were trading lower with SGX Nifty, KOSPI, Taiwan Weighted, and Nikkei 225 down more than 1%. Mirroring the trend, Indian shares are also trading in negative territory, down almost 1.3% intraday.
Hawkish Fed: Major indicators of the US economy are still showing encouraging trends, which is likely to prompt the US Fed to continue interest rate hikes for longer than expected. The signals coming from the Fed members also point towards possibilities of the central bank continuing policy tightening next year as well. A higher interest rate regime, tight monetary policy may lead to an economic slowdown which has stoked recession fears. Recession is negative for equity markets and the global indices including India have responded expectedly.
Recession fears: With the core inflation remaining sticky in most economies around the world, central banks of many countries are likely to continue with monetary tightening in 2023 as well. This is increasing the probability of large global economies like China, and the US falling into a recession and the experts are seeing diminishing chances of a soft landing. This is expected to aggravate the problems of financial markets further, fuelling recession concerns which led to investors running away from risky assets.
COVID threat looms again: Bulls are getting spooked by the news about the rising cases of COVID and the increasing number of deaths in China which might push the Chinese economy further on the back foot. Reports about a few cases of Omicron variant found in India, suspected new Covid variant, and the advisories issued by the government are also adding to investors’ fears. There is an element of overreaction in the market to the Covid news, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Year-end pressure: Nifty is feeling pressure on rises as investors rush to take profits and raise cash ahead of the month, quarter, and calendar year-end, according to Deepak Jasani of HDFC Securities.