Indian equity benchmarks plunged over 1 per cent to start September, a month that is often poor for global stocks’ returns, reversing two-straight months of bull run as hawkish central banks and a lockdown in China heightened market apprehension.
The 30-share BSE Sensex index crashed 770.48 points to end at 58, 766.59 and the broader NSE Nifty-50 index tanked 216.50 points to 17,542.80.
From the Sensex pack, Reliance Industries, Tata Consultancy Services, Sun Pharma, Tech Mahindra, Infosys, NTPC, Hindustan Unilever, HDFC, Power Grid, Bajaj Finance and ICICI Bank were among the major laggards.
In contrast, Bajaj Finserv, Asian Paints, Bharti Airtel, Titan, State Bank of India, Mahindra & Mahindra and IndusInd Bank were the gainers.
The Nifty IT index dropped 2 per cent.
“Global weakness is reflecting in Indian equity markets. IT is seeing selling due to concerns of growth in key markets like the United States and Europe,” Siddharth Khemka, head of retail research at Motilal Oswal Financial Services, told Reuters.
“There is a little bit of weakness because of marginally lower-than-expected GDP (gross domestic product). There are hardly any big positive triggers in the market,” he added.
While the pace of economic growth at 13.5 per cent was the fastest in a year, economists warned higher interest rates could cool that momentum in the coming quarters.
The energy index fell 1.9 per cent after the government late on Wednesday raised taxes on aviation, diesel fuel exports and domestic crude oil.
Shares of Oil & Natural Gas Corp fell 2.81 per cent, while Reliance Industries dropped 2.94 per cent.
Zee Entertainment fell as much as 6 per cent after a Reuters report said the Indian competition regulator found more scrutiny was needed over the company’s prospective merger with the Indian unit of Japan’s Sony.
Dish TV shares surged up to 20 per cent after the broadcast satellite service provider said Chairman Jawahar Lal Goel would not seek reappointment, signalling a win for top shareholder Yes Bank in its push for a board overhaul.
On Wednesday, Indian stock, currency and money markets were closed on account of Ganesh Chaturthi, a day after soaring to mark several key milestones.
On the first day of September, global stocks and bonds extended their selloff as a hawkish drumbeat from central banks and a lockdown in China further frayed investor nerves.
“The Fed effect is now melding with other global factors such as China’s growth slowdown and Europe’s stagflation to create a more fraught global macro environment with higher rates and lower growth,” Alvin Tan, strategist at RBC Capital Markets in Singapore, told Bloomberg.
“It is this combination of hawkish central banks led by the Fed, China’s slowdown and Europe’s stagflation that is now driving volatility across global markets,” he added.
August was the first month in forty years when investors had no opportunity to profit, denied by an ultra aggressive Jerome Powell’s Federal Reserve.
Every major asset fell, including equities, bonds, and commodities. Stocks retreated in August after their best July in eight decades.
The least-atrocious return was a 1.9 per cent loss as shown in a Bloomberg index tracking high-yield corporate bonds. Worse still were drops of 2.2 per cent in Treasuries, 3.9 per cent in commodities, and 4.2 per cent in the S&P 500.
Rarely has it been proven more brutally that you shouldn’t challenge the Fed. The last time the best-performing asset did worse in a month was December 1981.
“The only way to make money in an absolute sense is cash or shorting something,” James Athey, investment director at Aberdeen Asset Management, told Bloomberg.
“The forward growth outlook is deteriorating. Risk assets are still nowhere near appropriately priced for such an environment and I expect weakness to continue,” he added.
Financial market jitters, which follow losses in August, reflect concerns about an economic slowdown and restrictive monetary policies intended to stifle inflation. The two-year Treasury yield reached 3.50 per cent for the first time since 2007 as a result of a worldwide bond sell-off.
As Europe’s Stoxx 600 fell more than 1.5 per cent, driven by miners and real estate, a global equity index touched a six-week low. Following a sales warning from Nvidia Corp., US chipmakers declined in premarket trading, dragging down Nasdaq 100 futures. The technology sector also weighed on Asian shares.
Aggressive tightening and China’s downturn lowered expectations for oil demand, which put crude on the back foot. Silver and gold both dropped to their lowest levels in two years. Group of 10 and commodity-linked currencies also declined, while the yen hit a new 24-year low as the dollar surged.
Every market is being driven the path of Fed policy and its impact on the economy. Linkage among assets has strengthened, forcing every investor to become a macro trader. A measure of cross-asset correlation tracked by Barclays Plc sat near the highest levels of the past 17 years.
There is “no place to hide, with fears of tightening liquidity driving a surge in cross-asset correlation,” Emmanuel Cau, head of European equity strategy at Barclays, told Bloomberg.
“Tape is fragile with fluid gas situation in Europe, mixed inflation data, weaker data in all regions including China and no central banks’ put strike in sight,” he added.