Indian equity benchmarks crashed as world stocks plummeted driven by the growing risk of more aggressive interest rate hikes globally, which inflicted fresh pain on bond markets and pushed the dollar to new 20-year highs, just as recession fears mount.
The 30-share BSE Sensex index ended Monday with losses of over 700 points and the Nifty fell nearly 1.3 per cent.
Tech Mahindra was the biggest loser in the Sensex pack, shedding 4.57 per cent, followed by Infosys, Wipro, HCL Technologies, Tata Consultancy Services, Kotak Mahindra Bank, Tata Steel, Axis Bank, ICICI Bank and State Bank of India.
On the other hand, Maruti, Nestle, Asian Paints, ITC, M&M and Hindustan Unilever were among the gainers.
“Jerome Powell’s hawkish tone during the Jackson Hole symposium pointed towards a stricter rate hike while investors were expecting a milder policy action post the release of the softer July inflation reading. This has increased concern about an economic slowdown, which has caused a significant sell-off in the US market and spillover effects on markets around the world,” Vinod Nair, Head of Research at Geojit Financial Services, told PTI.
“The sell-off in emerging markets like India was exacerbated by concerns over the possible withdrawal of foreign funds, which was the backbone of the recent market rally,” he added.
Speaking at the Jackson Hole symposium on Friday, Federal Reserve Chair Jerome Powell said the Fed will raise rates as high as necessary to stifle growth and maintain them there “for some time” to lower inflation, which was running way above its 2 per cent target.
Two-year US Treasury yields reached their highest level since 2007 as investors realised that rates would remain higher for a longer period of time even as the likelihood of a recession increased.
European stocks slumped to their lowest level in almost six weeks and were down 1 per cent. US stock futures were deep in the red and Japan’s blue-chip Nikkei slid over 2.5 per cent
London markets were closed for a holiday, while MSCI’s world equity index fell 0.7 per cent to a one-month low.
“The message from Jackson Hole was loud and clear and not what markets were expecting,” Nordea chief analyst Jan von Gerich, told Reuters.
“Central banks need convincing evidence that inflation is coming down. That is bad news for the economy and risk appetite and raises the risk of a deeper recession if we get more rapid rate hikes.”