Stocks plunge as Wall Street rout triggers global meltdown

Stocks plunge as Wall Street rout triggers global meltdown

The benchmark indices tanked on Thursday, as macro risks weighed on investors, wiping out investor wealth of Rs 6.7 trillion. Markets in the US posted their worst single-day fall overnight since June 2020 amid muted earnings by retailers and prospects of an aggressive policy tightening by the central bank to tackle inflation. What added to the rout was a report by JP Morgan that downgraded the entire IT sector, sharply dragging down the IT index. Software stocks, which boast of the highest weight on the Nifty50 after financial services, fell the most in Thursday’s trade. Plunge in frontline stocks like Infosys, TCS, Wipro, HCL Tech and Tech Mahindra had a major impact on the indices.

The market’s fear gauge – India VIX – surged over 10% on Thursday to 24.56. The market capitalisation of BSE-listed companies fell Rs 6.7 trillion, from Rs 255.77 trillion a day ago to Rs 249.06 trillion on Thursday. While the Sensex settled 1,416.30 points or 2.6% lower at 52,792.23, the Nifty-50 ended lower by 430.90 points or 2.7% at 15,809.40, its worst single-day performance since February 24. Both the Sensex and Nifty have now declined about 7.5% so far this month. The gauge for IT stocks – Nifty IT index – slumped 5.7% to mark its biggest single-day fall since March 2020. With Thursday’s fall, the index has come off 28% from its January highs.

Naveen Kulkarni, chief investment officer, Axis Securities, said, “Growth momentum in the global economy is slowing down due to liquidity tightening by central banks. The war is not showing any signs of easing which will keep energy and food prices high. Both these variables point to a stagflation kind of scenario globally, which can lead to discretionary spending going down. This is fuelling greater volatility in global equity markets, including India.”

However, he believes that the market momentum is expected to improve in the second half of the financial year, once the markets price in the impact of global slowdown and higher rates.

Outflows from foreign portfolio investors continued to weigh on the markets. On Thursday, FPIs offloaded shares worth $630.4 million, taking the outflow figure to $4.3 billion for this month. Between January and now, they have sold Indian equities worth $21.6 billion, Bloomberg data showed. Domestic institutional investors bought shares worth $415 million on Thursday, provisional data from the exchanges showed. “Till the time FIIs remain net sellers, the south-bound journey will be difficult to reverse,” said Shrikant Chouhan of Kotak Securities.

India was the worst performing market in Asia on Thursday. Hong Kong’s Hang Seng declined 2.5% and Japan’s Nikkei 225 declined 1.9%. On the other hand, China’s Shanghai Composite ended higher by 0.36%.

Among Nifty stocks, Wipro, HCL Tech and Infosys were the top laggards, falling up to 6.3%. ITC bucked the trend in an otherwise volatile session as the stock gained 3.3% after the company reported a 12% jump in its Q4 net profit to Rs 4,191 crore.