The Indian equity benchmarks sank on Monday mirroring losses in global equity markets after inflation in the US touched a new 40-year high in May triggering concerns of aggressive rate hikes by the US Federal Reserve that will dry up liquidity in global markets. The Sensex fell as much as 1,776 points and the Nifty 50 index broke below its important psychological level of 15,700.
"Nifty has immediate support around 15,400 and if it breaks then fall will increase in the markets. Traders should sell on and fresh buying should be done around 16,000," Sumeet Bagadia, executive director at Choice Broking told Outlook Business.
As of 2:29 pm, the Sensex was down 1,697 points at 52,607 and the Nifty 50 index dropped 3 per cent or 497 points to 15,704.
Consumer prices surged 8.6 per cent last month from a year earlier, faster than April’s year-over-year increase of 8.3 per cent, the US Labor Department said Friday. The new inflation figure, the highest since 1981, will heighten pressure on the Federal Reserve to continue raising interest rates aggressively.
On a month-to-month basis, prices jumped 1 per cent from April to May, much faster than the 0.3 per cent increase from March to April. Contributing to that surge were much higher prices for everything from airline tickets to restaurant meals to new and used cars. Those price spikes also elevated so-called “core” inflation, a measure that excludes volatile food and energy prices. In May, core prices jumped a sharp 0.6 per cent for a second straight month. They’re now 6 per cent above where they were a year ago.
The Fed is all but certain to implement the fastest series of interest rate hikes in three decades. By sharply raising borrowing costs, the Fed hopes to cool spending and growth enough to curb inflation without tipping the economy into a recession. It will be a difficult balancing act.
Meanwhile, stock futures in US markets were indicating a weak session for markets in the US as Dow Futures fell nearly 2 per cent and Nasdaq Futures dropped 2.85 per cent.
Stocks in Europe were also trading sharply lower with Germany's DAX down 1.88 per cent, France's CAC40 index fell 2.1 per cent and England's FTSE100 declined 1.74 per cent.
Back home, selling pressure was broad-based as all the 15 sector gauges compiled by the National Stock Exchange were trading lower led by the Nifty PSU Bank index's over 4 per cent decline. Nifty Metal, Bank, Private Bank, Realty, IT and Financial Services indexes also fell between 3-4 per cent.
Mid- and small-cap shares were also facing intense selling pressure as Nifty Midcap 100 index dropped 3 per cent and Nifty Smallcap 100 index tumbled nearly 4 per cent.
Bajaj Finserv was top Nifty loser, the stock fell 7 per cent to Rs 11,415. Hindalco, Bajaj Finance, IndusInd Bank, Tech Mahindra, Tata Motors, TCS, ICICI Bank, Adani Ports and Infosys also fell between 4-6 per cent.
On the flipside, Nestle was the only gainer in the Nifty 50 basket of shares.
The overall market breadth was extremely negative as 2,859 shares were declining while 574 were advancing on the BSE.