Mkts log biggest weekly drop in two yrs as indices drop sixth day on trot

Benchmark indices shed over 5% each as investors take money off risky assets amid fears of global recession after US Fed's 75 bps rate hike

The Benchmark Nifty and Sensex indices fell for the straight sixth day on Friday, capping their worst week in over two years.

The Sensex ended this week at 51,360.4, a decline of 5.4 per cent or 2,943 points from the previous week. The Nifty, on the other hand, ended the session at 15,293.50, a drop of 5.9 per cent from the last week. The Nifty Midcap 100 index and the Nifty Smallcap 100 index decline 6.2 per cent and 7.9% per cent, respectively.

This was the worst weekly showing for the market since May 8, 2020—during the aftermath of covid-19 crisis.

Investors took money off risky assets amidst fears of a global recession after the US Federal Reserve raised its interest rates by 75 basis points, its most significant increase since 1994. Low-interest rates and monetary easing by central banks have led to a record-breaking rally in equities across the globe since 2020. The shrinking of balance sheets and hike in interest rates to tame inflation has rattled the market.

Central banks across the globe have prioritised fighting inflation after price rises hit new peaks. India's wholesale price inflation numbers were 15.8 per cent (year-on-year) in May, the highest in three decades. The consumer price inflation numbers for May, released Monday, came in at 7.04 per cent. It was the fifth straight month when retail inflation was above RBI's medium-term target of keeping consumer price rise at 4 per cent with a bias of 2 per cent on either side.

"Rising inflation and policy tightening by global central banks are forcing the market to discount the recession possibilities. With central banks' policy tone pointing towards continued rate hikes of higher magnitude, we can expect FPIs to maintain their selling spree. The domestic market will continue to trade with high volatility soon. However, the ongoing corrections are opportunities in disguise on medium to long-term investments," said Vinod Nair, head of research, Geojit Financial Services.

The raging war in Ukraine and its impact on commodity prices have also dented investor sentiments. Analysts said Indian equities are unlikely to come out of the bearish phase till the inflationary outlook improves in America or corporate results in India are decisively better.

Foreign portfolio investors stepped up their selling on Friday, yanking out Rs 7,819 crore. Domestic institutional investors provided buying support to the tune of Rs 6,087 crore.

"Markets are largely taking cues from the global markets without any major domestic event. And, going ahead, the US Fed chairman's speech and China's interest rate decision would be important triggers for the markets. On the domestic front, the Covid trend and the progress of the monsoon will also be in focus. We reiterate our negative view on markets and suggest continuing with the "sell on rising" approach," said Ajit Mishra, VP of research, Religare Broking.

The market breadth was weak on Friday with 2,330 stocks declining and 999 advancing. 35 stocks ended with losses on the Nifty 50 index led by Titan (down 6.1 per cent), Wipro (-3.8 per cent) and Shree Cement (-3.7 per cent).