Benchmark indices stayed on the back foot on Tuesday after the previous session’s rout as risk-off sentiment prevailed amid weak global cues and persistent foreign fund outflows.
The benchmark Sensex made some gains during the session but could not hold on to them and ended at 52,693.57, with a decline of 153 points, or 0.3 percent.
The Nifty50, on the other hand, ended the session at 15,732, a drop of 42 points or 0.27 percent. After five sessions of losses — during which the Nifty has declined 780 points, or 4.73 percent — the 50-share index ended at its lowest level since July 28, 2021.
Surging inflation across the globe has forced central banks to embark on aggressive monetary tightening and interest rate hikes. The sell-off this week was triggered by the US inflation, which reached 8.6 percent in May, the highest in 41 years.
The 10-year US bond yield traded at 3.2 percent on Monday, the highest since November 2018. Investors are apprehensive that the rate hikes by central banks may push economies into recession and are selling risky assets.
Fears of higher rates leading to a US recession kicked the S&P 500 down by over 20 percent from its most recent record closing high, a common definition of a bear market.
The 30-share BSE Sensex and the broader NSE Nifty turned green during the session on Tuesday.
But data showed the wholesale-based inflation measure stayed above double-digits for a 14th straight month and pushed Indian stocks lower on fears the Reserve Bank of India may have to order more interest rate hikes to curb soaring price pressures.
Financials and bank stocks weighed on sentiment in Indian markets, with the Nifty Finance index down 0.8 percent.
The Nifty metal index was up 0.5 percent, with Ratnamani Metals and Tubes the top gainer at 2.5 percent.
From the Sensex pack, Asian Paints, Tech Mahindra, IndusInd Bank, HDFC Bank, Titan, and HDFC were the major laggards in early trade.
On the other hand, Bharti Airtel, Power Grid, NTPC, M&M, and Bajaj Finserv were among the gainers.
Border Asian shares tumbled, with the MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.9 percent early on Tuesday. Australian shares S&P/ASX200 sank 5 percent in early trade, while Japan’s Nikkei stock index was down 1.74 percent.
The US Federal Reserve will meet on June 14 and 15 and is expected to raise interest rates by 50 basis points. But the hotter-than-expected inflation data has fuelled speculation that the US central bank may consider a 75-basis point hike. Some experts have even suggested a 100-basis point hike.
The Federal Reserve chief, Jerome Powell, has acknowledged that the unemployment rate may rise a bit. And, the central bank may only be able to provide a “softish” landing for the economy, he said.
“The US Fed outcome, along with its commentary on Wednesday, would set the tone for the near-term market direction. The global high inflationary environment, fresh curbs in China, and rising crude oil prices are likely to keep the markets under pressure for a while.
On the domestic front, persistent sell-off by FIIs, coupled with a weak rupee, is further dampening investors’ risk appetite,” said Siddhartha Khemks, head of retail research, Motilal Oswal Financial Services.