Indian equity benchmarks started Friday on a gloomy note, extending losses for the third straight session, tracking a sea of red in Asian bourses driven by a sell-off in global markets on looming recession worries from the broadest policy tightening in decades.
Prashanth Tapse, Senior Vice President for Research at Mehta Equities, ahead of the morning bell said, "equity markets are likely to extend losses in early trades Friday, mirroring the weakness in global indices as investors are gearing up for a stronger interest rate hike by the US Fed following the recently announced higher-than-expected inflation numbers."
"Whenever the Federal Reserve has raised interest rates - emerging markets like India turn volatile as capital tends to flee to safer shores as yields rise elsewhere," he added.
After falling below the 60,000 mark on Thursday, the 30-share BSE Senex index was down 538.2 points at 59,395.81, and the broader NSE Nifty-50 index declined 161.3 points to 17,716.10, after tanking to below 18,000 points in the previous session.
The Nifty IT index and the Automobile index fell 1.1 per cent and 0.5 per cent, respectively.
Among the major laggards from the Sensex pack were Mahindra & Mahindra, Tech Mahindra, TCS, Wipro, HDFC, Infosys, Axis Bank, HCL Technologies, and Power Grid.
Among the first winners were IndusInd Bank, Bajaj Finance, Sun Pharma, and Asian Paints.
"The market has started showing some indications of fatigue. Globally, the major concern now is that the Fed might oversteer the economy and end up raising rates too much too fast, pushing the US economy into a sharp recession," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told PRI.
"In this challenging environment, it would be difficult for India to sustain the decoupling from the global trend, which has been a recent pattern in India. Moreover, FIIs have halted their sustained buying and have turned into sellers. However, this is not yet a trend," Mr Vijayakumar added, citing sharply rising bond yields, dollar, and rates detrimental to equity.
Asian markets declined on Friday as traders anticipated an even more aggressive rate hike in the United States next week to tame stubbornly high inflation and as worries about a worldwide recession increased, driven by warnings from the World Bank and the International Monetary Fund.
MSCI's largest equities index outside of Japan from the Asia-Pacific region was down 0.3 per cent after US stocks concluded the prior session with slight losses. This month, the index has fallen 4.1 per cent thus far.
Most Asian bourses were down about 1 per cent on Friday, with the sombre mood merely an extension of a sell-off on Wall Street overnight after economic gloom warnings from prominent economic institutions.
The International Monetary Fund said, while it is still unclear whether there will be a broad worldwide recession, the global economic picture is still bleak. Some countries are predicted to enter recession in 2023, said the IMF.
In contrast, the World Bank warned that as central banks around the globe raise interest rates simultaneously to combat persistent inflation, the world may be on the verge of a recession in 2023.
"Equities and other risk-sensitive markets struggle as it becomes clear that US inflation pressures are well embedded and that risks to the fed funds rate lie to the upside," ANZ economists told Reuters.
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