Equity indices plunge 2.6% on inflation, global growth concerns

Rupee dips to lowest ever 77.76 intraday before closing at 77.65 against dollar

Key benchmark stock indices fell more than 2.6% Thursday on concerns around rising retail inflation and global growth, including in India.

The rupee also came under pressure owing to dollar outflows in a falling equity market. It closed at an all-time low of 77.65 against dollar.

The S&P BSE Sensex plunged 1,416.30 points, or 2.61%, to 52,792.23 led by a major sell-off in technology stocks.

Stocks that decline the most were Wipro (6.21%), HCL Tech (6%), Tech Mahindra (5.49%), Infosys (5.46%) and TCS (5.17%).

The NSE Nifty50 too slid 430.90 points, or 2.65%, to 15,809.40.

“The recent earnings reported by U.S. retailers reflected the heat of high retail inflation, resulting in the rout on Wall Street,” said Vinod Nair, head of Research, Geojit Financial Services. “Persistent offloading by foreign investors, along with mounting fears of an economic slowdown wreaked havoc in the domestic market,” he added.

Growth momentum in the global economy has been slowing down due to liquidity tightening by central banks, said Naveen Kulkarni, chief investment officer, Axis Securities, said.

The Russia–Ukraine conflict has also not been showing any signs of easing, with newer categories of weapons introduced in the conflict, which would keep energy and food prices high, he pointed out.

"Both these variables point to a stagflation kind of scenario globally, which can lead to discretionary spending going down. This is fuelling greater volatility in global equity markets, including in India," he said.

He warned that markets may remain volatile in the "near term but expect better market conditions in the second half of the financial year once markets price in the impact of global slowdown and higher rates”.

The rupee came under selling pressure and continued to move lower again but closed higher than in yesterday’s session.

It dipped to 77.76 intraday before closing at 77.65 against the dollar, compared with the close of 77.62 in the previous session.

"The rupee has continued its losing streak after a brief respite, as fragile risk sentiment in the markets continue to push the domestic currency on a lower incline," said Sugandha Sachdeva, vice president, Commodity and Currency Research, Religare Broking Ltd.

"Even as the greenback has softened from its two-decade highs, and crude prices have also cooled off, the unabated outflows from domestic equities amid mounting concerns of a global economic slowdown and spiralling inflation are weighing on the local unit," she said.

"The overall bias is negative for the rupee-dollar exchange rate, and it seems primed to test the 78.50 mark in the near term. However, likely RBI interventions at regular intervals could soothe market nerves intermittently," she added.

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Printable version | May 20, 2022 12:51:23 am |