Sensex, Nifty slip again. What’s pulling the benchmark indices down?


by 5paisa Research Team Last Updated: Dec 15, 2022 - 12:56 pm 28.9k Views

It has been a furious Friday for the Indian stock markets, with domestic stocks losing nearly Rs 5 lakh crore in value in just the first 15 minutes of early trade. 

The overall market capitalization of the Bombay Stock Exchange (BSE) was down by nearly Rs 4.8 lakh crore, slipping from Rs 259.64 lakh crore to Rs 254.83 lakh crore by the afternoon. 

The sell-off was across the board, with six shares in the red for one in the green. While 2,320 shares were trading in the red, just about 447 were in the green and 76 remained unchanged. 

At around 1 pm, Sensex and Nifty were down nearly 1.8% and 1.9%, respectively, exacerbating the sustained sell-off the Indian markets have been witnessing over the last few weeks. 

The market sentiment was dampened even further earlier this week by the surprise announcement by the Reserve Bank of India (RBI) to raise its benchmark lending rate by 40 basis points (bps) to 4.4%. 

But is the RBI the only one raising interest rates?

Not really. The US Federal Reserve has been doing so for the last few months now, and again raised its benchmark rate by 50 basis points on the same day that the Indian central bank did. This was the biggest rate hike by the US Fed in 22 years, with more hikes expected in the coming months. The US economy contracted 1.4% in the March quarter, sparking fears of stagflation. 

Then, on Thursday, the Bank of England said that the UK economy could shrink in 2023 with an inflation rate of more than 10%, as it upped its benchmark lending rate by 25 basis points. Such a high inflation rate is unprecedented for any western economy, as most of the developed west has enjoyed low inflation over the past five decades or so. 

What about global oil prices?

To add to the bad news for countries like India, oil prices have been climbing for the last three days, as worries about tightening supplies underpinned prices ahead of an impending European Union embargo on Russian oil.

Rising oil prices would mean greater US dollar outflows from India, impacting the rupee negatively. 

The Indian rupee has been struggling against the greenback and is now close to the Rs 77 per dollar mark. The Indian currency could depreciate further as the global markets become risk-averse and institutional investors begin withdrawing their investments from emerging markets like India, to the relative safety of their home countries. 

May is the eighth month on the trot when foreign investors are net sellers of domestic equities. 

Moreover, on Thursday, OPEC+ agreed to only a modest monthly oil output increase, arguing that the producer group could not be blamed for disruptions to Russian supply and saying China's coronavirus lockdowns threatened the outlook for demand.

What about the jobs market in the US?

What has further spooked global markets is that numbers released in the US say initial jobless claims ticked up to 200,000 last week amid continued labour market tightness.


How do you rate this article?

or

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.


Open Free Demat Account

Resend OTP
Please Enter OTP
Account belongs to

By proceeding, you agree to the T&C.

Latest News
Sahana Systems IPO GMP (Grey Market Premium)

Sahana Systems IPO worth ₹32.74 crore comprises entirely of a fresh issue of shares by the company. The price band has been fixed in the range of ₹132 to ₹135.

  • Jun 07, 2023
Spectrum Talent Management IPO GMP (Grey Market Premium)

The ₹105.14 crore IPO of Spectrum Talent Management IPO comprises entirely of a combination of a fresh issue of shares and an offer for sale (OFS) by promoters and early shareholders.

  • Jun 07, 2023
IKIO Lighting IPO GMP (Grey Market Premium)

IKIO Lighting IPO worth ₹607 crore comprises of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company.

  • Jun 07, 2023

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number