Key Benchmark Indicies declined 2 per cent on Thursday tracking losses in global markets. This came on the heels of the central bank minutes released on May 18 that spooked investors, flamed interest rate hike concerns, and corporate earning. The mood in Asia soured further after Chinese internet giant Tencent plunged on weak earnings. Marketmen fear earning downgrade cycle ahead, something which the market has ignored till now. Benchmark BSE Sensex sank around 1,200 points to an intraday low of 52,896, and the NSE Nifty 50 tanked over 300 points to 15,903. The broader markets were also weak in line with frontline indices. The India VIX surged 9 per cent to 24 levels indicating high nervousness amid investors.
What is Spooking the D-Street Today?
Weak Q4 Hit Wall Street
Wall Street indices tumbled on Wednesday as Dow Jones shed 3.2 per cent, S&P 500 traded lower by 3.6 per cent, and Nasdaq Composite slipped 4.3 per cent. The sharp plunge came after growth shares reversed rally as shares of US retail giant Target fell 25 per cent to $162 in trade, the biggest fall seen since October 19,1987.
Naveen Kulkarni, Chief Investment Officer, Axis Securities, said: “US Markets were red on Wednesday due to big earnings misses by target and major retailers which also stoked investor’s fears that surging inflation might decrease profits.”
Asian Markets Hurt
Asia-Pacific markets tracked the steep selloff in US markets on Thursday as investors fret over rising inflation and Ukraine war. Hong Kong’s Hang Seng index fell 2.25 per cent whereas shares of Chinese tech behemoth Tencent plunged over 6 per cent after report weak earnings call. Meanwhile, Nikkei 225 fell 1.75 per cent, South Korea’s Kospi dropped 1.34 per cent and Austalia’s ASX 200 slipped 1.61 per cent.
Rate Hike, Inflationary Woes Led Sell-off
Parth Nyati, Founder, Tradingo, said: “Global inflation has become the biggest spoilsport and has derailed the economic growth recovery globally. The post-pandemic inflation which was once believed to be transient has now become an entrenched one. Inflation rates are at a 40-year high in countries like the UK, and USA. The American retail majors Walmart and Target have disappointed on the Q1 earnings front, indicating that even large companies are unable to cope with the supply chain and inflationary woes. This has created a huge sell-off and meltdown in the majority of the stock markets globally.”
Record Low Rupee & Foreign Outflows
Record low rupee is weighing on foreign flows into the country. The partially convertible rupee stood at 77.6780 against the greenback and traded near all-time low levels.
A weakening rupee makes investments in Indian equities unattractive to foreign investors. Foreign equity outflows in May have topped Rs 30,000 crore mark. For 2022, they stood at Rs 1,57,556 crore so far in 2022.
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