Sensex, Nifty tumble amid global macro concerns; factors pulling stock market lower

All sectoral indices, led by auto, FMCG, IT, metals and realty, were trading in the red. The BSE midcap and smallcap indices were down over half a percent each in early trade.

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The Indian stock market further slipped in the red on December 20 amid fears of a recession in the US and a surge in COVID-19 cases in China.

At 10:51 hrs IST, the Sensex is down 576.14 points or 0.93% at 61230.05, and the Nifty down 179.80 points or 0.98% at 18240.70.

All sectoral indices, led by auto, FMCG, IT, metals and realty, were trading in the red. The BSE midcap and smallcap indices were down over half a percent each.

Prashanth Tapse – Research Analyst, Senior VP (Research) at Mehta Equities feels that the market may continue to witness a choppy trend in intra-day trades and are likely to drift lower in early Tuesday trades amid weakness in SGX Nifty and overnight fall in the key US indices.

“Investors continue to fret over the Federal Reserve’s hawkish stance that could tip the world’s largest economy into recession next year. However, the major catalyst for investors would be the recent RBI monetary policy meeting’s minutes, which are expected to be wired on Wednesday. It would provide some indication to traders on what holds for the markets in the medium term with regard to interest rates, inflation and the economy. Also, the US GDP numbers, which will trickle in on Thursday, would be keenly followed, providing some indication of where the world’s largest economy is headed,” he said.

Here are the factors pulling markets lower:

Weak global indices:

Wall Street closed lower on Monday for a fourth straight session with Nasdaq leading declines as investors shied away from riskier bets, worried the Federal Reserve’s tightening campaign could push the US economy into a recession. The Dow Jones Industrial Average fell 162.92 points, or 0.49 percent, to 32,757.54, the S&P 500 lost 34.7 points, or 0.90 percent, to 3,817.66 and the Nasdaq Composite dropped 159.38 points, or 1.49 percent, to 10,546.03.

Among the Asian names, Nikkei was down over 2 percent while Hang Seng and Taiwan shed over a percent each. SGX Nifty was down 148 points or 0.8 percent at 09:43 AM and was trading at 18,339 level.

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US recession fears spook investors:

Investors are worried that the Federal Reserve’s monetary policy tightening campaign could push the US economy into a recession. Fed’s Chair Jerome Powell took a more hawkish tone than expected when the central bank raised interest rates. Powell promised further increases even as weak data showed signs of a weakening economy.

Bank of Japan to allow long-term interest rates to rise more

Bank of Japan (BOJ) has decided to allow long-term interest rates to rise more, a move, analysts said, could signal a step towards changing Japan’s long-held yield curve control. In its final meeting of the year, the BOJ said its yield curve control (YCC) targets, set at -0.1 percent for short-term interest rates and around zero for the 10-year bond yield would remain. But significantly it decided to allow the 10-year bond yield to move up and down 50 basis points from the 0 percent target, against the previous 25 points.

Expert Views:

Anand James – Chief Market Strategist at Geojit Financial Services

The reversal moves lined up for yesterday unfolded unanticipated lines, almost meeting the objective of 18,440. Favoured view sees a period of consolidation early today inside the 18,360-320 region before a directional movie unfolds. We will hold the 17,900 view on standby for now, and wait for a slippage below 18,270 to play the same, and until then, the bias looks to tilt towards seeing 18,520-670 or even the 18,800.

Sectoral overview:

All sectoral indices were trading in the red down a percent each. The midcap and smallcap indices shed 0.5-1 percent each. The top losers included Hindalco, Mahindra & Mahindra and Tech Mahindra while the most active stocks were Dabur India, LIC, Adani Enterprises and Yes Bank.

(With agency inputs)

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.