Sensex Falls Over 270 Points, Extending Deep Losses For Second Straight Session

Indian equity markets fell further in early trade on Friday after a sharp sell-off in the previous session as major central banks hinted at higher for longer interest rates despite a threat of a global economic slowdown.

The BSE Sensex index fell 271.64 points to 61,527.39, and the broader NSE Nifty index opened in the red.

“Weak global equities is indicating a rough start for local markets as the theme still revolves around the Federal Reserve Chairman Jerome Powell’s hawkish stance on interest rates going ahead,” said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.

Following a rate increase in the United States on Wednesday, interest rates rose on Thursday in Europe, Britain, Switzerland, Denmark, Norway, Mexico, and Taiwan. Markets were concerned about a potential recession as a result of central bankers’ promises to keep raising rates until inflation is under control.

That comes at a time when US data signalled an economic slowdown, with retail sales and factory output falling more than expected.

“Central banks are still hawkish, still intent on raising rates,” Alvin Tan, Asia Currency Strategist at RBC Capital Markets in Singapore, told Reuters.

“So there’s a tension between the central banks being more hawkish than the market has been expecting, and that dichotomy has been emphasised over the past 48 hours by both the Fed and the European Central Bank,” he added.

The S&P 500 plummeted 2.5 per cent over night on Wall Street, which was its largest percentage decline in more than a month.

There is the prospects of further volatility in equity markets over the coming months,” he said on Bloomberg Television. “But at the same time, if inflation data continues to moderate, don’t be surprised if the tone of the messaging changes in meetings early next year as well.”

Also weighing on domestic stocks is the rise in crude prices.

Despite negative pressure from interest-rate hikes, oil was poised for its greatest weekly gain since early October on signs of shrinking supply and the likelihood of improving Chinese demand.

For nations like India, which imports the majority of its crude, the increase in oil prices is detrimental.