Indian stocks down on increased flight-to-safety transactions
Indian benchmark indices fell Tuesday as fears of global economic growth pushed flight-to-security deals, and a defeat in US stocks after news of a cut in Russian gas supplies to Eastern Europe had heightened the gloomy mood.
The 30-share BSE Sensex 30 stock index fell nearly 400 points to about 56,960, and the broader NSE Nifty fell nearly 1 percent to below 17,100 in early trading exchanges.
In the previous session, the Sensex index was up nearly 800 points to about 57,356, while the Nifty rose nearly 1.5 percent to about 17,200 after both indexes fell more than 1 percent on Monday.
Stocks lost ground in all sectors, with all major Nifty sub-indices negative. Only three of the 50 stocks on the Nifty 50 index were slightly higher.
The handy Hindustan Unilever component was 0.4 percent lower than the March quarter results.
Bajaj Finance was the biggest loser on the Nifty 50, down nearly 4 percent a day after it reported the results.
Broadly speaking, this is caused by Russia’s latest move, which is seen as a significant escalation of the crisis in Ukraine.
Russia said it would stop deliveries to Poland and Bulgaria from Wednesday. Russia is demanding payments for its gas exports in rubles in response to Western sanctions.
“Markets returned to downright pessimism on Tuesday after a gloomy reflection on Monday. U.S. stocks had fallen sharply. The S&P 500 fell 2.81 percent and the NASDAQ fell just under 4 percent to bring it below 20% year-on-year. to date. US and Asian stock futures are sending an unequivocal negative signal…” said Robert Carnell, Regional Head of Research – Asia-Pacific at ING.
“The catalysts for these steps were even more belligerent words from Russia about Ukraine, and the announcement that Bulgaria and Poland would stop their gas supplies from Russia from today,” he added.
This move caused oil and gas prices to rise. Brent oil futures rose to nearly $106 a barrel. Crude oil prices rose about 3 percent in volatile trading last session.
Financial markets are already reeling from the war between Russia and Ukraine and the supply disruptions that have pushed up commodity prices.
This has pushed global inflation to multi-year highs, and in response, the expected aggressive monetary policy path, especially from the US Federal Reserve, has fueled fears about global economic growth.
Severe restrictions in China also weighed on investor sentiment, although the central bank announced stimulus measures there.
Still, the broader outlook shows that the expected series of interest rate hikes from the Federal Reserve could hurt growth just as many economies begin to recover from the pandemic-induced slump.
Investors were also concerned about volatile commodity prices amid the war in Ukraine, with the International Monetary Fund warning this week of stagflationary risks in Asia.
The overnight sell-off on Wall Street underscored investor concerns about the blow to earnings, with the Nasdaq falling 4 percent, its lowest point since late 2020. Aftermarket closes,
Google’s parent company, Alphabet Inc, reported first-quarter sales of the pandemic, falling about 3 percent. Microsoft Corp. fell 4 percent faster than its results, but recovered as it forecast double-digit revenue growth the next year.
“I think with where the market is now, in this random sell and fear phase, I think you have more potential for downside risk than upside surprise,” said Ross Mayfield, an investment strategist at Baird in Louisville, Kentucky, told Reuters.
