The key benchmark indices extended losses as the day progressed and weakness spread to other counters. FMCG, IT and select index heavyweights like Reliance Industries and Larsen & Toubro weighed. The key indices are choppy in trade, in line with global markets ahead of key macro-economic data. The US is slated to release its April inflation numbers later today, while China’s factory and consumer prices for the month have come above estimates.
BSE Sensex and Nifty 50 tanked over one per cent in intraday deals on Wednesday, one day before weekly F&O expiry. The benchmark indices were pulled down on the back of selling in index heavyweights such as Infosys, Reliance Industries Ltd (RIL), ITC, Larsen & Toubro (L&T), and Bajaj Finance among others. So far in the day, BSE Sensex has hit a day’s low of 53,519.30, while NSE Nifty 50 fell to 15,992.60. Indian stock markets were also seen mirroring global markets.
Why Is The Stock Market Falling Today?
India Volatility Gauge
India VIX, the volatility gauge, was also above 23.50 levels, which suggests that the market is going to remain highly volatile and under selling pressure. Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities, said: “If NSE Nifty 50 breaks below 16000 level then it may go down further towards 15700-15500 level in the short term. However, 16300-16400 are likely to act as a resistance zone in the near-term.”
CPI Inflation Data
Globally, investors were keenly awaiting the US CPI report, which could give an indication as to when the prices could be topping, analysts noted. Meanwhile, the domestic CPI number will be released on Thursday and expectations are it could be between 7.5 to 8 per cent.
FPI Outflows
Data showed foreign outflows hit Rs 1,41,089 crore so far in 2022. This is in addition to Rs 38,521 crore outflows seen in the last three months of 2021. A rise in the dollar is weighing on emerging market equities. India, which enjoys premium valuations over EMs is on sell radar. In terms of valuations, the Indian benchmark Nifty50 is still trading at a 12-month forward P/E of 19.4 times, which is in line with its 10-year average. Its price to book value, at 3 times, is at a 16 per cent premium to its historical average.
Policy Tightening
Since there are no signs of the Ukraine-Russia war abating, supply shortages have led to high inflation in food and energy. China factories not operating optimally due to the Covid surge which is also hampering supplies, raising the inflationary trend. This has led the US and other developed markets to hike rate aggressively in the last couple of months. Even the RBI, which had been supporting growth to inflation, increased the policy rate by 40 basis points last week. All such concerns have triggered sharp falls in equities.
“US inflation data due today will be watched to gauge it’s likely impact on Fed’s rate hike plan. The strength in dollar is also putting pressure on gold prices and the Fed’s aim of bringing inflation down without derailing the economy is challenging amid this uncertainty caused by Russia and Ukraine war,” said Ravi Singh-Vice President and Head of Research-ShareIndia.
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