Stocks tank amid global rout, rupee sinks to an all-time low

Bond yields soar on fears Fed may hike rates aggressively as inflation zooms

Swaraj Singh Dhanjal and Gopika Gopakumar

MUMBAI: Indian stocks tumbled, the rupee hit a record low, and bond yields jumped as fears that the US central bank may pursue a more aggressive rate-hike path following Friday’s faster-thanexpected inflation reading rattled investors worldwide.

Benchmark indices Nifty and the Sensex plunged by 2.64% and 2.68%, respectively, on Monday, the sharpest drop since early March, while 10-year government bond yields climbed to their highest since January 2019, hitting a high of 7.602%. The Indian currency breached the 78 to a dollar mark for the first time, ending trading at 78.03. The rupee weakened to a record low of 78.28 to a dollar in intraday trading.

Investors fretted about the US inflation report, with traders now expecting the Fed to take more aggressive action to rein in runaway inflation, which could stifle economic growth prospects across the world. US consumer prices rose 8.6% in May, the fastest increase since 1981.

“US bond yields are now trading above 3.15% levels, indicating the aggressive rate hike expectation by the Fed in the upcoming FOMC (Federal Open Market Committee) meeting, scheduled this week. The market is now eyeing the outcome of the meeting and how the central bank influences the path of interest rates trajectory to maintain growth and inflation dynamics,” said Naveen Kulkarni, chief investment officer, Axis Securities.

The nervousness put global markets under pressure as well, with Asian indices seeing a sharp sell-off. Japan’s Nikkei and Hong Kong’s Hang Seng fell 3%, while European stocks lost 1.6-2.33%.

“Asian stocks sank as red-hot inflation reignited worries about even more aggressive US interest rate increases while new mass Covid-19 testing in China sparked concerns of more crippling lockdowns. European equities slid to the lowest level since early March as investors worried that surging inflation would fuel more aggressive monetary tightening, increasing risks of a recession,” said Deepak Jasani, head of retail research, HDFC Securities.

The sell-off in global stocks also sent the S&P 500 down more than 20% from its January record into bear market territory. Futures for the S&P 500 fell 2.4% in early trading on Monday.

The volatility indicator, India VIX, jumped 13% on Monday, indicating rising nervousness among investors.

MUMBAI: An eye-popping $17 billion wipeout in market value has made Life Insurance Corporation of India Ltd one of the biggest wealth destroyers among Asia’s initial public offerings (IPOS) this year.

Having plunged 29% since its May 17 debut, India’s biggest ever IPO now ranks second in terms of market capitalization loss since listing, according to data compiled by Bloomberg. The drop puts it just behind South Korea’s LG Energy Solution Ltd, which saw a more than 30% peak-to-trough decline in its share price after an initial spike on debut.

Almost a month after listing, LIC’S $2.7 billion share sale has turned out to be one of Asia’s biggest new stock flops this year, as rising interest rates and inflation levels globally hurt demand for share sales and with India’s stock market facing unprecedented selling pressure by foreigners. The Sensex is down more than 9% this year.