Indian equity benchmarks posted their eighth consecutive day of decline, the longest since May 2019 as economic data from the US and Europe raised fears of aggressive monetary policy for a longer time.
The benchmark Sensex fell 326 points, or 0.5 per cent, to end the session at 58,962. Nifty on the other hand ended the session at 17,304 a decline of 88 points or o.5 per cent. In the last eight sessions, the Sensex declined by 3.8 per cent and the Nifty by 4.1 per cent.
The rising inflation data from France and Spain raised the bets for a 4 per cent peak rate by the European Central Bank (ECB) by the end of February 2024 against the expectation of a 3.5 per cent hike at the beginning of the year. This sent bond yields soaring, putting pressure on global equities.
Economic data from the US on Monday further strengthened the case for stronger hikes. Pending home sales in January in the US rose the most since June 2020 and orders placed with factories for business equipment also rose.
Investors are pricing in a peak US rate of 5.4 per cent against an expectation of 5 per cent earlier. Meanwhile, Federal Reserve Governor Philip Jefferson on Monday defended the US central bank's inflation target of two per cent and said any change in target could destabilise inflation expectations. Analysts said the latest economic data would further strengthen the resolve of central bankers to keep hiking rates till inflation is tamed.
The Indian markets also logged their third straight monthly decline with rate hike worries, hawkish statements by US central bankers, rising geopolitical tensions and the rout in Adani stocks are keeping investors on tenterhooks this month.
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"Inflows are being diverted to safe assets, and corporate earnings growth is dropping, affecting the performance of the stock market and demanding a downgrade in valuation. The double whammy for India is that it is expensive compared to other emerging markets, resulting in underperformance among the global market,' said Vinod Nair, head of research, Geojit Financial Services.
The decline in the last eight sessions eroded the market capitalisation of BSE-listed companies by Rs 10.6 trillion to Rs 258 trillion. Foreign portfolio investors (FPIs) sold shares worth Rs 4,559 crore on Tuesday, mostly on account of the rebalancing in the MSCI indices. Domestic institutions were net-buyers to the tune of Rs 4,610 crore.
"Markets are not seeing respite despite the oversold positions however the pace of decline has subsided in the recent sessions. We expect Nifty to respect the 17,100-17,200 zone thus the possibility of consolidation is high. Meanwhile, focus on stock-specific opportunities based on sectoral trends and limit leveraged positions," said Ajit Mishra, VP-technical research, Religare Broking.
After declining for most of the last two weeks Brent crude rose by 1 per cent on Tuesday and was trading at $ 82.6. India VIX, a gauge measuring volatility, rose by 8.8 per cent in the eight sessions.
The market breadth was weak with 1,808 stocks declining on BSE against 1,655 advances. More than two-thirds of Sensex stocks declined on Monday. Reliance Industries fell 2 per cent and contributed most to the Sensex losses.