No let-up in market sell-off as recession fears build for world economies

Stocks tumbled once again on Wednesday as concerns over uncertain economic outlook kept investors on tenterhooks. Brushing aside a sharp rally in the US equities overnight, most Asian markets opened lower with stocks failing to consolidate gains made a day earlier.

Experts said risk aversion among investors is due to scepticism over whether policymakers will be able to achieve aggressive monetary tightening to tame inflation without triggering recession.

The Sensex declined 709 points, or 1.35 per cent, to end the session at 51,822.

The Nifty 50 ended the session at 15,413 - a drop of 225 points, or 1.4 per cent.

The S&P 500 Index of the US rose 2.5 per cent on Tuesday, but the US futures market on Wednesday indicated another lower opening on Wall Street.

“It seems that markets just can’t shake off fears of intensive central bank tightening and recession nerves… Tuesday’s Wall Street equity rally looks more and more like gone in 60 seconds,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.

Lately, most world markets have been moving in sync as policymakers all over have embarked upon a rate-increase trajectory.

Investors also were nervous ahead of the testimony by US Federal Reserve (Fed) Chair Jerome Powell to US lawmakers later in the day.

Powell’s testimony is likely to give further clues about whether the Fed is likely to do a 75-basis point hike in its July meeting. Investors are worried that aggressive rate hikes and unwinding of monetary easing by central banks will push economies into recession.

“Equity markets reversed their initial week’s gains as investors worry over slower economic growth amid rising inflation and rate hikes. The overall market trend remains weak. Hence, we suggest continuing with the sell-on-the-rise strategy for traders,” said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services

Foreign portfolio investors sold shares worth Rs 2,920 crore, taking their month-to-date selling tally close to Rs 45,000 crore.

Experts pointed out that a drop in retail participation and overall volumes is also putting downward pressure on stocks

“Volumes have fallen sharply below normal levels, suggesting a lack of adequate buying to offset the selling pressure,” said Deepak Jasani, head of retail research, HDFC Securities.

“The Nifty has support at 15,293-15,350, while on the upmove, it could face resistance from 15,565 and later 15,670,” he added.

Experts said investors will have to brace for another volatile day as markets are expected to react to the Fed chief’s statement on Thursday.

“We reiterate our cautious stance on the markets and expect volatility to remain high in the near term. Meanwhile, traders are advised to keep a hedge position, while investors should focus on stock selection,” said Ajit Mishra, vice-president of research, Religare Broking.

Besides the Fed commentary, he said stocks will react to the progress of the monsoon, crude oil price, and currency movements.

The market breadth was weak, with 2,147 stocks declining and 1,184 advancing. Barring four, all the Sensex constituents ended the session with losses. Metal stocks continued to whipsaw, with its sectoral gauge falling 5 per cent.