Sensex drops more than 215 points, increasing losses for the fourth consecutive session

Indian equity benchmarks slumped on Wednesday, widening losses for a fourth straight day after the Reserve Bank of India hiked rates at a more modest pace but lowered its growth outlook, even as it said the battle against inflation was not over.

The 30-stock BSE Sensex index fell 215.68 points, or 0.34 percent, to close at 62,410.68, and the broader NSE Nifty-50 index fell 82.25 points, or 0.44 percent, to to end at 18,560.50.

After swinging between gains and losses in early trading on Wednesday, both indices fell as the RBI hiked rates for a fifth straight and warned that inflation, while likely to have peaked, is still high and the central bank is focused on exerting downward pressure on prices.

With a 2 percent drop, NTPC led the pack of losers on the Sensex, followed by Bajaj Finserv, IndusInd Bank, Tata Steel, Reliance Industries and Sun Pharma.

Asian Paints, HUL, L&T, Axis Bank and ITC, on the other hand, were among the winners.

Equity benchmarks have fallen for four straight days after an eight-day bull run, including a record six straight days.

The indices had risen to all-time highs on recent indications of slowing inflation and the fall in the price of crude oil, which is favorable for a major crude oil importer like India.

But they fluctuated over the previous three sessions due to the RBI meeting and solid US data, which dampened hopes that the Federal Reserve will ease the cycle of rate hikes.

The global mood also remained gloomy for risky assets.

Investors tempered their euphoria over China’s reopening as reality gnawed at expectations for a softer economic landing in the United States, stalling the rally in world stocks.

Overnight, the S&P 500 fell for a fourth session in a row, extending the shutdowns for nearly two months. Brent futures are now trading around $79.50 a barrel, returning oil to where it was at the start of the year.

“Some of the optimism that drove the rally is being tested,” Shane Oliver, head of investment strategy at Australia’s AMP, told Reuters.

“Perhaps we are moving from a situation where we are concerned about inflation and interest rates to one where the negative factors become weakening growth and falling profits,” he added.

With rising interest rates and inflation threatening consumer demand, major US banks are bracing for a weaker economy in 2019. In their speeches on Tuesday, senior executives from Goldman Sachs, JP Morgan and Bank of America all sounded gloomy.

“Economic growth is slowing,” David Solomon, CEO of Goldman Sachs, told Reuters. “When I talk to our customers, they sound extremely cautious.”

In response to that growth fear, longer-dated bonds rallied and the safe-haven dollar was able to recoup some of its previous losses.

Chinese stocks in Hong Kong suffered a slump late in the day amid investor perceptions that the road to reopening would be difficult and the chances of an economic recovery uncertain.

Market investors quickly posted gains after occasional rallies as questions remain over how to reopen Asia’s largest economy.

While senior officials are reportedly debating a growth target of around 5 percent, there are concerns about an expected increase in infections and more economic disruptions in the coming year.

“While the market is still trading on the positive expectations, we are not completely out of the woods as we still have to get past the panic that could come with the first wave of infections,” Ma Xuzhen, a fund manager at Longquan Investment Management, Bloomberg said.

Weak trade data, including a larger drop in Chinese exports and imports in November, added to negative sentiment.

“Uncertainties remain high,” especially about how disruptive the exit from Covid Zero could be and whether policymakers are prepared to stimulate the economy, Macquarie International Services economists, including Larry Hu, wrote in a research note, according to Bloomberg.

There wasn’t much excitement about risky assets in the world of European equities on Wednesday, with Asian stocks trading within a range after Wall Street stocks lost ground again as markets gradually adjusted for higher rate hikes.

In the commodities market, Brent futures fell 0.6 percent to $78.86 a barrel after falling below $80 for the second time in 2022 during the previous trading session. Spot gold held steady at $1,772 an ounce.

In the digital currency market, with sentiment frail as the effects of FTX’s collapse spread through the industry, Bitcoin lost 1.6 percent to under $17,000.