Early on Monday, there was chaos in Indian stocks in Sensex and NSE as the aggressive monetary policy stance of the US Fed Chair alarmed international financial markets. The slaughter in local equity benchmarks was partly caused by the fact that international stocks continued to decline due to concern that aggressive rate hikes elsewhere may stifle global economic growth.
The NSE Nifty 50 index was down 337 points, or 1.92 percent, to 17,221.40, while the 30-share BSE Sensex index fell 1,153 points, or 1.96 percent, to 57,680.87. All 30 companies that make up the Sensex were trading in the negative territory, with Tech Mahindra, Infosys, HCL Technologies, Wipro, Tata Consultancy Services, Tata Steel, and Power Grid standing out as the most significant underperformers.
Data from the National Stock Exchange showed that all Nifty 50 traded substantially in the red. The rate-sensitive real estate index fell 2.8%, while the IT index fell 4.4%. Local equities markets concluded the week with slight gains on Friday but lost ground the week before due to growing concerns about a worldwide recession brought on by weak economic data from Asia to Europe and the Americas.
The Nifty nudged 36.45 points to 17,558.90, and the Sensex index ended the day with modest gains of 59.15 points to conclude at 58, 833.87.
On Monday, Asian markets declined as bond rates and the dollar increased significantly, valuations for equities and earnings were tested, and there was an increasing likelihood that the United States and Europe would implement more draconian rate hikes. A worldwide share index hit a one-month low as IT companies hammered Asian shares, which lost almost 2%.
World Indexes
The Federal Reserve Chair Jerome Powell’s promise to inflict “pain” on the economy to contain inflation crushed hopes that the central bank would support the markets as frequently as in the past, sending stocks and equities futures plunging and two-year Treasury rates to levels last seen in 2007.
The hawkish message was not what Wall Street wanted to hear, as S&P 500 futures sank another 1.1% after dropping almost 3.4% on Friday. Nasdaq futures also plummeted 1.5% as tech stocks were under pressure due to weaker economic growth. The worst-performing sectors for the most extensive MSCI index of Asia-Pacific stocks outside of Japan were technology and industrials, which saw a decline of as much as 2.3%.
While the Nikkei in Japan dropped by 2.8%, South Korea lost 2.3%. Due to China’s COVID-19 lockdowns and rising global interest rates, the region’s equity markets have been under selling pressure this year. With Monday’s fall, the benchmark Asian stock index has lost more than 18% of its value this year, underperforming its counterparts in the US and Europe.
A member of the ECB board named Isabel Schnabel warned that central banks must now take significant action to battle inflation, even if doing so causes their economies to enter a recession, over the weekend. The EURO STOXX 50 futures dropped 1.7%, and Chinese blue chips slipped 0.6% in response to the ECB’s rate concerns.
The aggressive central bank chorus drove up short-term rates globally and further inverted the US Treasury curve as markets priced in a future economic downturn. Indeed, when monetary policy tightens, predictions of a recession increase as bonds decline and the Treasury yield curve inverts further.
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