The tech-fuelled rout in China also sent shock waves to the European market as key indices were trading about 1% lower.
Indian equities ended the day in the red after five days, as investors sold Chinese stocks on rising Covid-19 cases and worries over the Federal Reserve raising interest rates weighed on the market. An overnight surge in the US treasury yields also sparked nervousness. The yield on 10-year US Treasury bond climbed above 2% on Monday, for the first time over the last one month.
While the Shanghai Composite slumped 5% to hit an over 20-month low, Hang Seng plunged 5.7% to test its lowest level since February 2016. Both the Sensex and Nifty50 slid about 1.2%, whereas the broader midcap and smallcap indices fared slightly better with a less than 1% drop. While the Sensex slid 709.17 points to settle at 55,776.85, the broader Nifty ended the day 208.30 points lower at 16,663 points.
The severe sell-off in Chinese tech stocks, along with weakness in commodities such as copper and iron ore, dragged both IT and metal stocks in India on Tuesday. While Hindalco Industries fell the most on Nifty50, Tech Mahindra, Infosys and HCL Technologies lost between 2-3%. Shares of Hindalco Industries corrected 5.3% to close at an over two-week low of Rs 559.75 on the NSE.
“Chinese tech stock rout deepened, slashing billions of dollars from the likes of Alibaba Group Holding and Tencent Holdings in Hong Kong, on heightened concerns about an industry crackdown, Covid-19 outbreaks, and China’s position on the Ukraine conflict,” said Deepak Jasani, Head of Retail Research at HDFC Securities.
Cracks in tech stocks even widened after JPMorgan Chase downgraded 28 Chinese internet stocks including Alibaba, Tencent Holdings and Meituan to underweight, calling them “uninvestable” over the next six to 12 months due to rising geopolitical and macro risks.
The tech-fuelled rout in China also sent shock waves to the European market as key indices were trading about 1% lower. However, Dow Jones futures and Nasdaq futures tilted higher on Tuesday. While copper on the London Metal Exchange fell 2.5%, aluminium slid 5.1%. Iron ore futures in Singapore also retreated.
More than two stocks declined on the NSE for every rise on Tuesday. Of the 2,109 stocks traded, 1,462 scrips ended the day in the red. A sharp fall in the advance decline ratio suggests that local investors, too, seem to have panicked as the war troubles don’t seem to be ending and the US Fed meet outcome is just a day away, Jasani said.
Barring the gauge for Auto and FMC, all sectoral indices on the NSE lost value on Tuesday. While Metal fell the most with 4.1% drop, IT followed with 2.6% decline from the previous close.