Markets tank as investors get spooked by hawkish central banks

Benchmark indices tanked on Friday as the selloff in the market intensified on weak global cues. Investors turned cautious amid central banks taking a hawkish stance and a surprise rate hike by the Bank of England on Thursday. Adding to the volatility, the daily Covid-19 cases witnessed a sharp uptick across some areas of the country, whereas the Omicron tally stood at 101, the health ministry said on Friday. India Vix – the market’s fear gauge – climbed 2.7% to 16.33 levels. The overall advance/decline ratio also turned mainly negative as only 993 shares advanced and 2,353 shares declined on the BSE.

Sustained selling from foreign institutional investors further continued to hurt the sentiment on the street. Banks and financials are among the top sectors where the investors trimmed their exposures. Foreign investors net sold shares worth Rs 1,468.71 crore in the Indian equity markets on Thursday, data from exchanges showed.

The 30-share BSE Sensex closed lower by 889.40 points or 1.54% at 57,011.74 with 25 declines in the index. Similarly, the Nifty fell 263.2 points or 1.53% at 16,985.20. IndusInd Bank was the top Sensex loser, down 4.8%, which was followed by Kotak Mahindra Bank, HUL, Titan Company and HDFC. On the other hand, Infosys, HCL Tech, Power Grid Corp and Sun Pharma were among the gainers on Friday.

“Negative global cues, continued FII selling, absence of any positive trigger, and increasing cases of Omicron are likely to continue putting pressure on the market. Thus, traders are advised to maintain their negative bias in the market for the next few days,” said Siddhartha Khemka, head – retail research, Motilal Oswal Financial Services. Sectorally, barring IT, all other sectors witnessed selling pressure from investors on Friday. The broader BSE mid-cap and small-cap indices also fell more than 2% each intra-day.

The Bank of England (BoE) became the first major global central bank to raise interest rates on Thursday amid rising inflation. BoE hiked its interest rate from a record low of 0.1% to 0.25%. Earlier this week, the US Federal Reserve also hinted about three rate hikes in 2022 to cool down inflation worries. Liquidity normalisation measures across the globe will further guide the markets, said analysts.

Hemant Kanawala, head–equity, Kotak Mahindra Life Insurance, said: “The US Fed’s pivot towards a hawkish stance and an aggressive timeline for tapering of asset purchases as well as rate hikes will in the near term shape the trajectory of markets, rupee and global flows. With liquidity normalising in the US and expected normalisation of India’s monetary policy in due course, we expect equity prices to remain under pressure.”