Indian equity benchmarks crashed for the second straight session on Friday as concerns about a potential global recession increased in response to hawkish remarks from major central banks this week.
After crashing over 870 points in the previous session, the 30-share BSE Sensex index fell a further 461.22 points, or 0.75 per cent, to close at 61,337.81 on Friday.
The Sensex pack's biggest laggards included Mahindra & Mahindra, Asian Paints, Dr. Reddy's, Tata Consultancy Services, State Bank of India, Wipro, PowerGrid, and Titan. Among the winners were Hindustan Unilever, HDFC Bank, and Nestle.
The broader NSE Nifty-50 index declined 145.90 points, or 0.79 per cent, to end at 18,269, compared to Thursday's close of 18,660.30.
"The commentary from global central banks this week has been the pain point for markets," Siddhartha Khemka, Head of Retail Research at Motilal Oswal Financial Services, told Reuters.
On Friday, Asian equities declined for the second day and were on track for their worst week in two months.
The largest Asia-Pacific share index outside of Japan, as measured by MSCI, dropped 0.8 per cent and for the week was down 2.3 per cent. This week, global stock prices are down 1.2 per cent.
"Forget about a year-end financial market rally; major central banks are sending a clear and unmistakable message: the fight to control inflation is far from done," said a stock trader at a Mumbai Bank.
On Wednesday and Thursday, central banks from the US, the euro zone, the UK, and Switzerland convened and eased the pace of aggressive rate hikes.
"The worrying aspect for markets is the rate hike finishing lines are still unknown, and we have the two most dominant central banks in the world climbing the mountain into very restrictive territory," noted Stephen Innes, Managing Partner at SPI Asset Management, according to Bloomberg.
"Hiking interest rates into a dimming macro environment will undoubtedly trigger a recession. The question is just how profound."
But the markets, which have recently surged strongly on the idea of peak inflation and interest rates, were not interested in their hawkish signals.
"Forget the Santa rally...the Fed looks more like the Grinch this Christmas," John Leiper, Chief Investment Officer of Titan Asset Management, told Reuters.
Treasuries fell, with yield curves steepening, suggesting an impending recession.
Ann-Katrin Petersen, a Senior Investment Strategist at BlackRock Investment Institute, said on Bloomberg Television that central banks were starting to acknowledge they will have to crush growth and likely engineer recessions to tame inflation.
The S&P 500 hit its lowest point in a month on Thursday. The index rose by as much as 2.76 per cent on Tuesday, reaching a three-month high as expectations that the Fed will soon stop raising interest rates were boosted by a surprisingly modest increase in consumer price inflation. The S&P has lost over 16 per cent so far this year.
"It does feel like the major central banks, including the Fed, are having to fight a market narrative of relief that we've hit peak rates," Hetal Mehta, Senior European Economist at Legal & General Investment Management, told Reuters.
"A market rally would be an easing of financial conditions that jars with the idea that they (policymakers) need to get interest rates into restrictive territory," added Mr Mehta.
Relief at the apparent resolution of a protracted accounting access issue with the United States was insufficient to spur a surge in China, where markets are teetering over an uncertain reopening.
In the energy market, oil fell on Friday, erasing its largest weekly gain since early October, due to indications that supply is tightening and the potential for stronger Chinese demand.
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