Markets crash on rate hike concerns

Hyderabad: Dampening investor sentiment, rate hike fears gripped Dalal Street as central banks globally are gearing up to tame high inflation. The market bellwether Sensex tanked 1,024 points to below 58,000-level on Monday as investors fretted over policy tightening by central banks amid elevated inflation. Further, unabated outflows from foreign funds added to the gloom. BSE Sensex and NSE Nifty closed in the red for a consecutive third session. The 30-share BSE Sensex plummeted 1,023.63 points or 1.75 per cent to finish at 57,621.19. Similarly, the broader NSE Nifty slumped 302.70 points or 1.73 per cent to 17,213.60.

Investors are now keeping their fingers crossed over the outcome of RBI PMC meeting, which was postponed by a day to Feb 8-10, on Thursday. Crude oil price is hovering over $92 per barrel and expected to hit $95/bbl soon.

The 1.74 per cent market crash eroded investors' wealth by Rs2.9 lakh crore on Monday. The market capitalization (mcap) of BSE fell Rs5.82 lakh crore in three sessions to Rs2,64,82,633.52 crore on BSE from Rs270lakh crore on February 2, 2022. Indicating uncertain sessions ahead, the volatility index India VIX rose 8.14 per cent to 20.44 level.

Despite higher valuations, the domestic stock markets continued to rally on ample liquidity in the global markets as several nations implemented stimulus packages to take on Covid impact. Bank of England (BoE) raised interest rates by 25bps to 0.5 per cent last week. And now market analysts expect US Fed would also hike interest rate in March.

The Sensex has now shed 1,937.14 points in three sessions, with the market capitalisation of BSE-listed firms plunging by over Rs 5.82 lakh crore during the period.

HDFC Bank was the top loser in the Sensex pack in Monday's session, tumbling 3.65 per cent, followed by L&T, Bajaj Finance, Bajaj Finserv, HDFC, Kotak Bank and Wipro. Only five counters managed to close in the green -- PowerGrid, NTPC, Tata Steel, SBI and Ultratech Cement, climbing up to 1.88 per cent.

"Domestic markets are volatile ahead of the state elections, witnessing a steep fall led by FII selling and weak global cues. US bourses were under pressure as strong US jobs data gave rise to fears of sharper than expected Fed rate hikes, resulting in a spike in the bond yields. The volatility in the market is likely to continue due to high chances of interest rate lift-off by the RBI given domestic inflation and policy tightening by global central banks," said Vinod Nair, head (research) at Geojit Financial Services.

Foreign institutional investors (FIIs) remained net sellers in the capital market, as they sold shares worth Rs 2,267.86 crore on Friday, according to stock exchange data.

Sector-wise, BSE finance, capital goods, bankex, FMCG, healthcare and telecom dropped as much as 2.30 per cent, while utilities, power and metal mustered gains. The BSE midcap and smallcap gauges skidded up to 1.25 per cent. (With inputs from PTI)