Indian stock benchmarks reversed a sharp rally in the previous session and started cautiously on Monday, tracking a decline in Asian stocks after another setback on Wall Street as investors braced for a more aggressive tightening in global financial conditions, with all the risks of a recession that this entails .
The latest minutes of the meeting revealed that the Monetary Policy Committee (MPC) of the Reserve Bank of India may be relying more on statistics in determining the country’s key interest rate as inflation is expected to begin to decline.
That calm tone from the RBI didn’t help Indian stocks.
The 30-stock Sensex index fell 137.84 points in early trading to 57,782.13. Similarly, the NSE Nifty-50 index fell 52.75 points to 17,132.95.
The biggest laggards of the Nifty components were Mahindra & Mahindra, Adani Enterprises, JSW Steel and Larsen & Toubro.
On the other hand, the early winners of the trade were Bajaj Auto, State Bank of India, ICICI Bank and Eicher Motors.
“Volatility will likely be the hallmark as Nifty Bulls brace for tough sessions in the near term as things are not looking good in Dalal Street right now,” said Prashanth Tapse – Research Analyst, Senior Vice President for Research at Mehta Equities , to PTI .
Both benchmarks reflected a sea of red in Asian stock markets. Hong Kong, Australia and Japan saw shares fall, with technology companies leading the way.
The S&P 500 and Nasdaq 100 contracts rose after falling on Friday as government bond yields rose as inflation estimates for the coming year rose.
Global equities have suffered from concerns about the global economy and a surge in demand for safe-haven assets as the Federal Reserve quickly raised interest rates this year to curb rising inflation, luring capital back to the United States and the value of the dollar rose.
While the S&P is a staggering 25 percent off its peak, BofA economist Jared Woodard warned the decline was not over as the world was moving from two decades of 2 percent inflation to a time of just over 5 percent. inflation, Reuters reported.
“$70 trillion in ‘new’ technology, growth and government bonds, priced at a world’s 2 percent, are vulnerable to these secular shifts as ‘old’ industries such as energy and materials soar, undoing decades of underinvestment” wrote Mr Woodard. in a note.
“Rotating 60/40 proxies and buying what is scarce – power, food, energy – is the best way for investors to diversify,” he added.
While everyone is turning their attention to British bonds now that the Bank of England (BoE) emergency buyout is over, concerns about financial stability are joining the toxic mix.
“The BoE was buying emergency bonds technically identical to QE with one hand, while furiously raising key rates with the other,” ANZ analysts said in a note.
“Monday’s market action will be a test of the survival of Truss’ low-tax vision and her political future.” While everyone is turning their attention to UK bonds now that the Bank of England (BoE) emergency buys are over, concerns about financial stability are being added to the toxic mix.
Investors are dealing with news from Beijing, where President Xi Jinping declared that China’s global power had been strengthened while warning of “dangerous storms” to come.
There was little indication that the Covid-Zero campaign or the housing market regulations that would put pressure on the economy would relax. Mr Xi also claimed that despite escalating hostilities with the US, China would prevail in its battle to develop crucial technology.
On other market news, oil recovered some of its losses after a weekly decline as concerns about an economic downturn continue to cloud demand prospects.
After a turbulent week in which the dollar appreciated on speculation about a more aggressive rate hike by the Fed, the gold price in Asia stabilized.