S&P Tumbles 6% as Global Sell-off Jolts Indian Markets
The global financial markets were in chaos on Wednesday as the S&P 500 plummeted 6%, marking its worst day since March 2020. The sudden sell-off triggered a rout across the globe, with Indian indices following suit. The Sensex tumbled over 2,200 points, as recession fears gripped investors, causing IT and pharma stocks to take a beating.
The Nasdaq, which has been under pressure for weeks, fell into bear territory, with the tech-heavy index now down over 20% from its recent high. The VIX volatility index, often referred to as the “fear gauge,” surged to its highest level since the COVID-19 pandemic began, indicating extreme investor anxiety.
The US market’s performance was abysmal, with all major indices falling sharply. The Dow Jones Industrial Average dropped over 1,000 points, while the Russell 2000 small-cap index tumbled over 4%. The losses were widespread, with nearly all sectors and industries experiencing significant declines.
The sell-off was triggered by a combination of factors, including rising inflation, the widening yield curve, and concerns over the global economic outlook. The US Federal Reserve’s decision to raise interest rates in March, despite inflation remaining above target, has added to the uncertainty.
“The market is reacting to the prospect of higher interest rates and the potential for a recession,” said Tom Essaye, founder of The Sevens Report. “The 10-year yield curve is inverted, which is a classic sign of a recession. We’re seeing a classic flight to safety, with investors dumping equities and moving to bonds and other safe-haven assets.”
The impact of the sell-off was felt across Indian markets, with the Sensex plummeting over 2,200 points to close at 48,300. The Nifty 50 index also fell sharply, closing at 14,400. The broader market was also affected, with the BSE MidCap and BSE SmallCap indices tumbling over 4% and 5%, respectively.
IT and pharma stocks were among the worst performers, with TCS, Infosys, and HCL Tech falling over 4% each. The losses were attributed to the sector’s high exposure to the US market, as well as concerns over the impact of the global sell-off on their business.
“The Indian IT sector is heavily dependent on the US market, and the recent sell-off is likely to impact their business,” said Ramesh Sitaraman, an analyst at Motilal Oswal. “The pharma sector is also likely to be affected, as the global economic slowdown could impact demand for their products.”
The Indian rupee also weakened sharply, falling over 1% against the US dollar to close at 76.20. The currency’s decline was attributed to the widening trade deficit and the global market volatility.
As the dust settles, investors are bracing for continued volatility across markets worldwide. The Nasdaq’s fall into bear territory is a major concern, as it could indicate a prolonged period of weakness in the tech-heavy index.
“The Nasdaq’s fall into bear territory is a sign of significant underlying weakness in the market,” said Scott Redler, partner at T3 Trading Group. “We’re likely to see continued volatility across markets, as investors grapple with the prospect of a recession.”
In conclusion, the S&P’s 6% plunge and the Indian markets’ sharp decline are a stark reminder of the global interconnectedness of financial markets. As recession fears spread fast, investors are bracing for continued volatility, with the Nasdaq’s fall into bear territory being a major concern.
Source: https://www.thecore.in/podcasts/us-stocks-whacked-for-the-third-day-833088
