S&P tumbles 6% as global sell-off jolts Indian markets
The global financial landscape witnessed a tumultuous day on Tuesday, with the S&P 500 index plummeting 6% to mark its worst day since March 2020. The steep decline triggered a cascade of selling across markets worldwide, sending Indian indices into a tailspin. The Sensex shed over 2,200 points, while the Nifty50 plunged over 700 points.
The sell-off was sparked by a trifecta of factors, including rising recession fears, a surge in bond yields, and a decline in technology stocks. The Nasdaq, which has been a bastion of growth in recent years, tumbled into bear territory, losing over 10% from its recent highs.
The carnage was mirrored in Indian markets, where IT and pharma stocks bore the brunt of the selling. The Nifty IT index fell by over 5%, with TCS, Infosys, and Wipro declining by 4-5%. In the pharma space, Sun Pharma and Dr. Reddy’s Laboratories dropped by 3-4%.
The global sell-off has been triggered by concerns about a potential recession in the United States. The yield on the 10-year US Treasury bond has been rising steadily, reaching levels not seen since 2018. This has led to a increase in borrowing costs for companies and individuals, which could slow down economic growth.
The sell-off in US markets has been exacerbated by the decline in technology stocks. The Nasdaq has been a key driver of the bull run in recent years, but it has now entered bear territory. This has led to a surge in volatility, with investors bracing for continued uncertainty in the days ahead.
The impact of the global sell-off has been felt across Indian markets, with midcaps and smallcaps bearing the brunt of the selling. The Nifty Midcap 100 index fell by over 4%, while the Nifty Smallcap 100 index plunged by over 5%.
While the sharp decline in Indian markets has been unsettling for investors, there are some positives to take away. The rupee has strengthened against the US dollar, which could help to reduce the impact of imported inflation. Additionally, the Reserve Bank of India (RBI) has room to cut interest rates if needed, which could provide a boost to the economy.
In the short term, investors may want to focus on defensive sectors such as consumer staples, healthcare, and utilities. These sectors tend to perform well during times of uncertainty and have historically been less volatile than other sectors.
In the medium term, investors may want to look at sectors that are likely to benefit from a potential recession. These sectors could include consumer discretionary, industrials, and materials. These sectors tend to perform well during economic downturns, as consumers and businesses focus on essential items and reduce discretionary spending.
In conclusion, the sharp decline in Indian markets has been triggered by the global sell-off and rising recession fears. While the short-term outlook appears uncertain, there are some positives to take away. Investors may want to focus on defensive sectors in the short term, while looking at sectors that are likely to benefit from a potential recession in the medium term.
Source: https://www.thecore.in/podcasts/us-stocks-whacked-for-the-third-day-833088
