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    Sensex and Nifty50 drop 2% as red-hot US inflation spooks global markets

    Sensex and Nifty50 drop 2% as red-hot US inflation spooks global markets

    Sensex and Nifty50 drop 2% as red-hot US inflation spooks global markets
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    By Sandeep Singh   IST (Published)


    The Sensex and the Nifty50 fell almost two percent on Wednesday, though faring better than their Asian peers, after a red-hot inflation reading in the US spooked investors on Wall street overnight.

    Indian equity benchmarks fell sharply amid a broad sell-off on Wednesday, as a worse-than-expected consumer inflation reading from the US sent shockwaves across global markets. The sea of red on Dalal Street, though better compared to other Asian markets, meant a sharp U-turn a day after the 50-scrip index made it back above 18,000 following a five-month-long gap.
    The sticky red-hot inflation in the US dashed nascent hopes the Fed could scale back its policy tightening in the coming months.
    Both headline indices tanked close to two percent in the first few minutes of trade. The Sensex tanked 1,154 points to hit 59,417.1 at the weakest level of the day so far, and the Nifty50 slid to as low as 17,771.2, down 298.9 points from its previous close.
    All of the Nifty50 constituents began the day in the red. Wipro, Infosys, Tech Mahindra, TCS and Hindalco were the top laggards.
    HCL Tech, Titan, HDFC, Dr Reddy's and Tata Motors — declining more than two percent each — were also among the worst-hit blue-chip stocks.
    Infosys, TCS, HDFC Bank and Reliance Industries were the biggest contributors to the fall in both main indices.
    All sectors struggled below the flatline.
    "The fall on Wall Street reminds us that there is more uncertainty about inflation and growth and more volatility ahead for markets. The worse-than-expected CPI inflation data in the US despite cooling gas prices was a surprise," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
    "The market fears that inflation is getting entrenched and an ultra-hawkish Fed might trigger a hard landing for the US economy. This thinking too, might change when new data emerges," he added.
    The Nifty IT fell most among NSE's sectoral gauges — its worst start to a day since August 29.
    Many analysts are positive on the IT space, which has sharply underperformed the overall market for much of 2022.
    Nischal Maheshwari of Centrum Broking remains positive on the space for two reasons: he believes margins may have bottomed out and attrition peaked at 27-28 percent. "We like all the largecap (IT) stocks out there: Tech Mahindra, HCL Tech and Infosys, in that order," Maheshwari, CEO-Institutional Equities and Advisory at Centrum, told CNBC-TV18.
    The rupee began the day 0.6 percent weaker against the US dollar compared to its previous close, though still more than half a percent away from a lifetime low hit last month.
    Weakness in the rupee boosts the profitability of IT companies, which earn the lion's share of their revenue from foreign markets, and vice versa.
    Overall market breadth favoured the bears, as 1,150 stocks rose and 1,762 fell on BSE in early deals.
    The India VIX — known in market parlance as the fear index — rose as much as 6.3 percent to 18.6, its biggest intraday jump in two weeks.
    Foreign institutional investors remained net purchasers of Indian shares, in line with the trend in the past few weeks. As of Tuesday, FIIs have net bought Indian shares worth Rs 7,844.2 crore, according to provisional exchange data.
    Global markets
    Equities in other Asian markets mirrored the steep losses on Wall Street overnight, with MSCI's broadest index of Asia Pacific shares outside Japan down two percent at the last count. Japan's Nikkei 225 was down 2.2 percent, China's Shanghai Composite 0.5 percent and Hong Kong's Hang Seng 2.1 percent.
    S&P 500 futures, however, eked out a gain of 0.3 percent. On Tuesday, the three main indices tanked 4-5 percent amid a broad sell-off.
    Disclaimer: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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