Shares drop over 2% on inflation worries, IT rout
The markets were hammered by losses in technology and metal stocks
BENGALURU: Shares fell more than 2% on Thursday, hammered by losses in technology and metal stocks, with investors globally dumping riskier assets as soaring inflation stokes fears of an economic slowdown.
The NSE Nifty 50 index ended 2.65% down at 15,809.40, while the S&P BSE Sensex dropped 2.61% to 52,792.23.
The benchmark indices that were up more than 2% for the week as of Wednesday, erased most of those gains in their second straight session of declines,. They have fallen nearly 7% so far this month.
Asian and European shares also tumbled after a brutal selloff on Wednesday on Wall Street that saw the S&P 500 falling the most since June 2020.
“The domestic market has resumed a downtrend taking cues from our global counterparts, the US markets specifically,” said Ajit Mishra, vice president, research at Religare Broking.
All major Nifty sub-indexes fell, with the Nifty IT index leading losses, down 5.74%. Earlier in the session, the sub-index dropped to its lowest since June last year.
Continued selling by foreign investors and the rupee sinking to another record low against the US dollar added to the woes.
Surging inflation, supplychain issues and the hit from the Ukraine war will bring an end to the growth boom that India’s IT services industry enjoyed during the pandemic, JP Morgan analysts said on Thursday.
IT stocks were the top five percentage losers on the Nifty, with Infosys, Wipro, HCL Technologies, Tech Mahindra and Tata Consultancy Services plunging between 5% and 6%.
Nifty’s metal index dropped 4.1% led by a 5.2% drop in Steel Authority of India.
ITC rose 3.3% and was one of the three gainers on the Nifty, after the cigarettes-to-hotel conglomerate late on Wednesday reported a jump in March-quarter profit.
JK Lakshmi Cement settled 7.3% higher. The company late on Wednesday reported a 15.5% rise in consolidated net profit for the March quarter.
The recent earnings reported by the US retailers reflected the heat of high retail inflation, resulting in the rout in Wall Street.
“In this highly volatile market, investors can focus on sectors such as fast-moving consumer goods, pharma, capital goods and manufacturing whose valuations are moderate and reasonable on a long term basis,” said Vinod Nair, head of research at Geojit Financial Services.
Stock markets in the US plummeted more than 4% on Wednesday after retail giants Target and Walmart came out with subdued numbers, reflecting the continued impact of soaring inflation on consumer spending.
“Deteriorating macro sentiments such as soaring inflation, recession fears, and the prospect of the US Federal Reserve getting even more hawkish will continue to keep benchmarks on the edge.