Shares fall on global inflation concerns
Global central banks took a hawkish stance and warned of surging inflation
BENGALURU: Indian shares posted broad-based declines on Friday, pressured by foreign fund outflows, and as global central banks took a hawkish stance and warned of surging inflation.
The NSE Nifty 50 index fell 1.53% to 16,985.20 and the benchmark S&P BSE Sensex dropped 1.54% to 57,011.74. Both the indexes shed nearly 3% this week after two consecutive weeks of gains.
“The emergence of a new Covid-19 variant, Omicron, inflation concerns and a hawkish turn of global central bankers have led to an increase in volatility in equity markets worldwide, including India,” said Shibani Kurian, head of equity research at Kotak Mahindra Asset Management Co.
“With inflation increasing in countries across the world, all eyes are on central bankers and the pace of liquidity normalisation adopted by them.”
This week, the Bank of England became the world’s first major central bank to raise interest rates since the pandemic hammered the global economy, following the U.S. Federal Reserve in signalling the risk of raging inflation.
The Federal Reserve, the Bank of England and the European Central Bank showed this week that “they no longer regard the downside risks to economic activity over the coming months as outweighing the need to address inflation pressure,” Adrian Hilton, head of global rates and currency at Columbia Threadneedle Investments, wrote in a note to investors.
As of Thursday’s close, foreign institutional investors have sold $728 million worth of Indian equities this week and $1.73 billion this month, according to Refinitiv Eikon.
The Nifty public sector bank index and real estate index were among top percentage losers on the day, falling 3.6% and 3.9%, respectively.
The information technology index was the lone gainer among sectoral indexes, ending up 1.35%, after Accenture Plc forecast better-than-expected second-quarter revenue and raised its annual business outlook.
Only five of the Nifty 50 constituents ended higher, with Wipro leading gains with a 4.1% jump.
Shares of Indiabulls Housing Finance fell 8.2% after the company said promoter Sameer Gehlaut sold an 11.9% stake and would resign from the board.
Meanwhile, the Nasdaq 100 led a drop in U.S. contracts, while tech shares were among the biggest declines in Europe and Asia. Investors also braced for a quarterly rebalancing of the S&P 500 Index after the market close and the so-called triple witching expiration of equity derivatives that could magnify market moves.
Central banks globally are prioritizing the fight against elevated inflation by tightening monetary settings, while also keeping a wary eye on the impact of omicron. That backdrop has investors questioning whether global stocks are due for a rougher patch after almost doubling from pandemic lows.
The 10-year Treasury yield slipped and the dollar was little changed. In Turkey, the lira touched an all-time low. Oil retreated for the first time in three days and European natural gas prices plunged from a record close after Russia in the last minute topped up supplies to the region.
Russia raised its key interest rate on Friday and left the door open to further increases. In contrast to the other major central banks, Japan lengthened its cautious withdrawal.
Meanwhile, South Africa delivered some positive news on the omicroncoronavirus variant on Friday, reporting a much lower rate of hospital admissions and signs that the wave of infections may be peaking.