It’s a bloodbath on Dalal Street. The market has lost most of the recovery seen during the one-month period between March 7 and April 4 of this year. Bears have tightened their grip, especially after the Reserve Bank of India (RBI), which had been behind the curve, decided to join the rate hike bandwagon last week. The apex bank hiked the repo rate by 40 bps and the cash reserve ratio by 50 bps, in line with global central banks, which had already started hiking policy rates to tame inflation.
The Street would have seen that inflation concerns are far from over, thanks to rising geopolitical tensions in Ukraine, which could slow down global growth. For instance, signs of a slowdown are already visible in the United Kingdom, which contracted by 0.1 percent in March, even as US inflation came in at a higher-than-expected 8.3 percent for April, giving rise to fears of continued policy tightening by the US Federal Reserve.
In India too, inflation concerns are visible in corporate earnings numbers. Experts expect these worrisome signs to last another couple of quarters.
"The pressure of increased inflation on corporate earnings is quite visible since the last two quarters and is expected to continue for another one-two quarters." As a result, earnings are getting downgraded more than being upgraded by the markets. The mix of earnings downgrades along with a reversal of the interest rate cycle is increasing volatility in the markets, "Sushant Bhansali, CEO, Ambit Asset Management, said."
At the time of writing this story, European markets were down 2.5 percent, and Asian counterparts, barring China’s Shanghai Composite (down 0.1 percent), had ended around 2 percent lower.
The US dollar index, which measures the value of the dollar against a basket of the world’s six leading currencies, jumped to 104.5, the highest since 2002.
Indian equities also mirrored the fall on Thursday, with the BSE Sensex plunging 1,158 points, or 2.1 percent, to 52,930, and the Nifty50 declining 2.2 percent, or 359 points, to 15,808, the lowest closing level since July 30, 2021, ahead of April inflation numbers and March industrial output data.
Investors lost more than Rs 5 lakh crore of wealth on Thursday, with the BSE market capitalisation falling to Rs 241.04 lakh crore, from Rs 246.3 lakh crore in the previous session.
In the last one month, the market mayhem has eroded more than Rs 34 lakh crore of wealth, as the BSE market capitalisation dropped to Rs 241.05 lakh crore, from Rs 275.17 lakh crore on April 11. In the same period, the BSE Sensex shed more than 6,000 points, or 10 percent.
"We believe that we are in the consolidation phase after the big bull-run in the last two years," a much-needed breather. Profit booking, alongside revisions in asset allocation, will drag the markets down while fresh flows will push the markets up during this phase, "Sushant Bhansali said."
He believes the consolidation phase will continue for a few more months, depending to a large extent on how inflation plays out globally.
Thus, "this phase can be anytime from three more months to three more quarters from hereon." During this phase, we expect the benchmark indices to be range-bound within 15-20 percent of their lifetime highs seen a few months ago. "Fresh highs will be seen at the end of this consolidation phase," said Bhansali.
All sectoral indices closed in the red on Thursday, with the BSE Power, Metal, Bank, Utilities, Telecom, and Finance being hit hard--3-4 percent. The broader space was also not left behind, as the Nifty Midcap and Smallcap indices declined 2 percent each.
The market breadth remained weak for yet another session, as for every share that climbed, more than three shares declined on the BSE. While 330 stocks hit 52-week lows, just 50 shares touched 52-week highs.
A total of 127 stocks from the "A" group touched 52-week lows on Thursday. These included HDFC AMC, Wipro, Nestle, Aarti Drugs, Amara Raja Batteries, Ashoka Buildcon, Bajaj Consumer, Bajaj Electricals, Bank of India, Birla Corporation, Bosch, CSB Bank, Dixon Technologies, Finolex Industries, Glenmark Pharma, Godrej Industries, Hindustan Zinc, Honeywell Automation, Jubilant Foodworks, Dr Lal PathLabs, MCX India, Motherson Sumi Systems, Info Edge, Punjab National Bank, RBL Bank, and Westlife Development.
Foreign institutional investors (FIIs) have net offloaded more than Rs 23,600 crore worth of shares in the current month, continuing the outflow for the eighth consecutive month, though domestic institutional investors (DIIs) have been trying hard to offset the selling by FIIs. They have net bought Rs 18,750 crore worth of shares during the current month, continuing their buying spree since March 2021.
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