As a result, the benchmark BSE sensex is now at 3-week low, falling below the 60,000-mark. While, the broader NSE Nifty is at a 4-month low.
On Wednesday, the BSE sensex tumbled 927.74 points or 1.53% to settle at 59,744.98, the lowest closing level since February 1. Similarly, the NSE Nifty declined 272.40 points or 1.53% to end at a four-month low of 17,554.30 with 47 of its constituents ending in the red.
As many as 266 stocks hit their 52-week low levels on BSE. The total market valuation now stands at Rs 2.61 lakh crore as against Rs 2.68 lakh crore on February 16.
Today’s market slump has itself eroded Rs 3.87 lakh crore of investors’ wealth.
Here’s a look at why stock markets are falling:
* Weak global cues
Losses in global equities was triggered after Wall Street posted its worst one-day slump of the year earlier this week.
Strong US economic data has fanned expectations that US interest rates will continue to rise and stay high for some time.
“The higher (US) interest rates stay, the less relative appeal stocks have, particularly as we are about to hit some serious earnings headwinds,” Neil Wilson, analyst at trading firm Finalto, told AFP.
* Rate hike fears
With most major economies facing the threat of slipping into recession, the monetary policy tightening by central banks continue to spook investors.
US business activity returning to expansion for the first time in eight months in February, has fuelled fears of continued high rates.
“The probability of impending rate hikes by the US Fed has risen from two to three, in the light of new data,” Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services told Reuters.
“Fear of a hawkish Fed has gripped markets and kept investors on tenterhooks.”
* RBI minutes on inflation
The Reserve Bank of India (RBI) released minutes of the monetary policy outcome announced on February 8. The released was keenly awaited by market participants.
According to the minutes of the MPC meeting, RBI governor Shaktikanta Das also mentioned that there is considerable uncertainty due to a host of global factors such as rising non-oil commodity prices.
“The fight against inflation is complicated by the global outlook. There is some consensus growing around a milder slowdown than earlier feared, although geographical disparities complicate the prognosis. Be that as it may, the outlook for global inflation is turning more uncertain than before,” Patra opined as per minutes of the Monetary Policy Committee (MPC).
* Concerns over further rate hike by RBI
While the RBI released its MPC minutes post-market hours, but expectations were rife that it might indicate further rate hikes.
Earlier this month, the MPC hiked the key repo rate by a quarter percentage point, as expected, but surprised markets by leaving the door open to more tightening, saying core inflation remained high.
“It will be premature to pause when there are no definitive signs of slowdown in inflation, particularly core inflation,” RBI executive director and MPC member Rajiv Ranjan wrote.
“Nevertheless, as the policy rate adjusted for inflation has now turned positive, albeit barely so, there is a case for paring down the pace of rate hike to the usual 25 bps,” he added.
Persistently high core inflation is a crucial concern at this stage, said external member Shashanka Bhide.
The monetary policy stance will need to remain disinflationary till inflation is returned to target, RBI deputy governor Michael Patra said.
* Geopolitical scenario
US President Joe Biden is wrapping up his whirlwind, four-day visit to Poland and Ukraine by reassuring eastern flank NATO allies that his administration is highly attuned to the looming threats and other impacts spurred by the grinding Russian invasion of Ukraine.
“Resurgence of the cold war between US & Russia has brought apprehension in the market. Although it should be a short-term effect, the fear of sanctions against Russia and its degree of implication on the economy, especially on food and oil exports, is adding to the anxiety. The market is just recovering from the pandemic, and high interest & inflation are the headwinds in the background.
“It is presumed that this war will be fought on an economic front, limiting its effect on strong economies like the US & India. Awaiting the release of Fed and RBI minutes are the other major elements that kept investors on the sidelines,” said Vinod Nair, Head of Research at Geojit Financial Services.
* Adani stocks continue to fall
The MSCI India Index slid as much as 1.7%, taking its losses from a December 1 peak to more than 10%. Eight of the 10 Adani-linked stocks are part of the measure. They were the biggest decliners on the index on Wednesday.
The decline in the MSCI measure marks a reversal from last year, when India’s stock gauges were in the running to be the best performers globally. Foreign funds have pulled out more than $3 billion from the country’s equities year-to-date, after $11.5 billion of inflows in the second half of 2022, according to latest data compiled by Bloomberg.
Stocks linked to billionaire Gautam Adani have weighed heavily on the MSCI gauge since short seller Hindenburg Research’s report was published on Jan. 24. The market capitalization wipeout of the conglomerate’s shares deepened on Wednesday to more than $140 billion, with all 10 stocks in the red.
* Fed Minutes awaited
Investors’ focus now turns to the release of the minutes from the Fed’s latest meeting later on Wednesday, which could offer more insight into policymakers’ plans.
“We’ve been in this dollar rebound for three weeks. The fundamental driver essentially is the market repricing Fed hikes higher,” Alvin Tan, head of Asia FX strategy at RBC Capital Markets told Reuters.
“That’s the near-term momentum and that’s the path of least resistance,” Tan said. “I wouldn’t fight it for now… a further extension of this rally is likely in my view.”
(With inputs from agencies)