S&P Tumbles 6% as Global Sell-off Jolts Indian Markets
The global financial landscape took a drastic turn last week as the S&P 500 plunged 6%, marking its worst day since March 2020. The sharp decline was triggered by a global sell-off, which had a ripple effect on Indian markets as well. The Sensex tumbled over 2,200 points, wiping out gains made in recent days. The sudden downturn has sparked concerns about a potential recession, sending IT and pharma stocks lower.
The S&P 500’s 6% decline was the largest one-day fall since March 2020, when the pandemic was spreading rapidly across the globe. The index has been under pressure in recent days, with three consecutive days of losses. The Nasdaq, which is heavily weighted with tech stocks, has entered bear territory, defined as a 20% decline from its recent highs.
The sell-off was triggered by a combination of factors, including rising inflation concerns, higher interest rates, and a decline in investor confidence. The yield on the 10-year US Treasury note rose above 3.2%, the highest level since 2018, which has made bonds more attractive than stocks. This led to a rush to sell stocks and buy bonds, exacerbating the decline.
The impact was felt across the globe, with Asian markets opening lower and European indices also falling sharply. The Nikkei 225 index in Japan plunged 4.5%, while the Shanghai Composite in China fell 2.5%. The FTSE 100 in the UK dropped 2.5%, and the DAX in Germany fell 3.5%.
Indian markets were no exception, with the Sensex and Nifty 50 indices plummeting over 2,200 and 700 points, respectively. IT and pharma stocks, which are major contributors to India’s stock market, were among the hardest hit. The rupee also weakened sharply, trading at 79.50 against the US dollar.
The sudden downturn has left investors on edge, with many wondering if the recent rally was just a temporary reprieve from the pandemic. The ongoing trade tensions between the US and China, as well as the uncertainty surrounding Brexit, have added to the market volatility.
Rajnish Kumar, a portfolio manager at SBI Mutual Fund, said, “The sell-off was triggered by a combination of factors, including rising inflation, higher interest rates, and declining investor confidence. The IT and pharma sectors are particularly vulnerable to recessionary conditions, which is why they fell sharply.”
Kumar added, “While the recent rally was driven by expectations of a V-shaped recovery, the current sell-off is a reminder that the road to recovery is still uncertain. Investors will need to be patient and wait for the dust to settle before making any investment decisions.”
The sudden downturn has also led to a rise in volatility, with the VIX index, which measures market anxiety, surging to its highest level since February. This has led to a rush to buy put options, which give the holder the right to sell a stock at a certain price. This has further exacerbated the decline, as the sudden increase in demand for put options has driven up their prices.
The Indian government has been monitoring the situation closely and has taken steps to reassure investors. Finance Minister Nirmala Sitharaman has said that the government is committed to supporting the economy and will take all necessary measures to maintain financial stability.
In conclusion, the recent sell-off in global markets, including the S&P 500’s 6% plunge, has sent shockwaves across India. The IT and pharma sectors have been particularly hard hit, and investors are bracing for continued volatility across markets worldwide. While the reasons behind the sell-off are complex, it is clear that investors will need to be patient and wait for the dust to settle before making any investment decisions.
News Source:
https://www.thecore.in/podcasts/us-stocks-whacked-for-the-third-day-833088
