The pack of 30 Sensex shares plummeted 1,416.30 points, or 2.61 percent, to 52,792.23. Its broadest pair, the NSE Nifty, lost 430.90 points or 2.65 percent to post its worst day since Feb. 24 and close near the 15,809.40 mark.
Weak quarterly results elsewhere, including China’s internet giant Tencent, added fuel to the fire.
Domestic shares eroded nearly Rs 6.36 crore lakh from investors’ kitty on Thursday. The data showed that the market capitalization of the BSE fell 6.3 lakh crore to Rs 249.40 lakh crore from Rs 255.7 lakh crore a day ago.
ITC was the only stock in the Sensex pack to finish with decent gains. The shares ended up 3.43 percent after the company announced March quarter results on Wednesday. Dr Reddy’s and Power Grid ended the session marginally positive.
“Recent earnings reported by US retailers reflected the heat from high retail inflation, which has sent Wall Street down,” said Vinod Nair, head of research at Geojit Financial Services.
Persistent dumping by foreign investors coupled with growing fears of an economic slowdown wreaked havoc on the domestic market, it added.
All sector indices also ended the session with deep cuts. The volatility index rose more than 10 percent to close near 2-month highs.
The Nifty IT Index was the biggest loser among sub-indices with a 5.8 percent drop. IT majors Infosys, Tech Mahindra and Wipro were the main laggards in the Nifty 50, falling more than 5-6 percent each.
“In this highly volatile market, investors can focus on sectors like FMCG, Pharma, Capital Goods and Manufacturing whose valuations are moderate and reasonable over the long term,” Nair said.
Sharp falls in markets followed Wall Street’s worst day since mid-2020 on Thursday, as dour warnings from some of the world’s biggest retailers underscored how hard inflation is hitting.
These main factors that weighed on the market today:
Retailers come to Wall Street
Weak results at US retailer Target have raised concerns that inflation will weigh on corporate profits globally.
A 25 per cent drop in a single day in shares of US retailer Target following its dismal results and comments, and a steady drop in bigger rival Walmart, was a reminder that ignoring inflation is not an option now and that sharp global earnings downgrades are a real possibility.
The US Fed had said in the past that it would raise US interest rates until there is “clear and convincing” evidence that inflation is receding. But rising interest rates may also have their own deleterious effects on US demand and could trigger a recession in the world’s largest economy. The Dow fell 3.6 percent while the Nasdaq fell 4.7 percent overnight. The S&P500 plunged 4.04 percent. All three indices were on track to extend a streak of at least six weekly losses.
Tencent adds to Asia’s wounds
If the overnight drop in US stocks was bad, the sharp drop in shares of Tencent, the Chinese internet company, was worse. China’s Tencent’s March quarter profit halved from a year earlier and revenue stagnated, reflecting the impact of Covid-19 lockdowns in that country.
On Thursday morning, Hong Kong was down 2.5 percent, while Tokyo was down 2 percent. The Taiwanese and Korean markets fell as much as 2 percent.
Increase in the advance distribution rate
Minutes from the recent MPC policy review on Wednesday suggested anticipated rate increases in the future. Nomura India now expects a 50 basis point hike in June from 35 basis points previously. “More anticipated rate hikes appear to be on the way, and the MPC wishes, in our view, to bring the repo rate back to its pre-pandemic level of 5.15 percent (from 4.40 percent) soon,” he said. Name. Nomura forecasts a 35bps rate hike in August, followed by a 25bps rate hike each in October, December, February and April. He said risks are skewed to the upside, both in June (a 75bp hike is live) and in his terminal rate forecast (6.25 percent).
Record low in rupees and foreign departures
The record low rupee is weighing on foreign flows into the country. The partially convertible rupee stood at 77.6780 against the dollar and traded near all-time lows.
A weakened rupee makes investing in Indian stocks unattractive to foreign investors. Foreign capital outflows in May have passed the Rs 30 billion mark. By 2022, they stood at Rs 1,57,556 crore so far in 2022.