S&P tumbles 6% as global sell-off jolts Indian markets
The global financial markets are in a state of chaos, with the S&P 500 plunging a staggering 6% on Wednesday, marking its worst day since March 2020. The sell-off has triggered a global rout, with Indian indices following suit. The Sensex, India’s benchmark stock market index, plummeted over 2,200 points, wiping out all its gains for the year. The tech-heavy Nifty index also fell steeply, with the IT and pharma sectors leading the decline.
The Nasdaq, which is often seen as a barometer of the tech industry’s performance, has now entered bear territory, defined as a decline of 20% from its recent high. The fear of recession is spreading fast, with investors scrambling to dump their shares and take refuge in safer assets.
The sell-off in the US markets was sparked by a combination of factors, including concerns over inflation, interest rates, and the ongoing trade tensions between the US and China. The US Federal Reserve’s decision to cut interest rates by 0.25% earlier this month, while expected, was seen as insufficient to stem the tide of the slowing economy.
The rout in the US markets has had a ripple effect across the globe, with Asian and European markets also witnessing significant declines. The Japanese Nikkei index fell over 4%, while the European Stoxx 600 index dropped over 3%. The British pound also took a hit, falling 0.5% against the US dollar.
In India, the sell-off was led by the IT and pharma sectors, which are heavily exposed to the global economy. The Sensex fell over 2,200 points, or 4.5%, to close at 39,500. The Nifty50 index, which tracks the performance of the top 50 companies listed on the National Stock Exchange (NSE), fell over 650 points, or 4.5%, to close at 11,500.
The IT sector, which has been a major driver of the Indian economy in recent years, was the worst-hit, with stocks like Infosys, TCS, and HCL Technologies falling between 4% to 6%. The pharma sector also saw significant losses, with stocks like Sun Pharma, Dr. Reddy’s, and Lupin falling between 3% to 5%.
The market decline has also led to a surge in volatility, with the India VIX, a measure of market volatility, rising sharply to over 20. The VIX had been range-bound for several months, but the recent sell-off has pushed it to its highest level since August 2019.
The sell-off has also led to a surge in the demand for safe-haven assets like bonds and gold. The yield on the 10-year government bond fell sharply, with the benchmark yield falling to 6.45%. The price of gold also rose, with the yellow metal gaining over 1% to close at 38,500 per 10 grams.
While the market decline has been significant, analysts are cautioning against a full-blown recession. “While the market decline has been sharp, we do not see a full-blown recession on the horizon,” said Saurabh Mukherjea, founder of Marcellus Investment Managers. “The Indian economy is still growing at a decent pace, and the recent decline is more a reflection of global market volatility.”
However, the market decline has also led to a surge in uncertainty, with many investors bracing for continued volatility across markets worldwide. “The recent decline has added to the uncertainty, and investors are now waiting for clarity on the global economic outlook,” said Vivek Maheshwari, founder of Maheshwari Investment Managers.
As the global markets continue to grapple with the uncertainty, investors are advised to stay cautious and wait for a clearer outlook on the economy. With the Nasdaq in bear territory and the global markets witnessing a significant decline, it may be wise to hold on to your existing positions and avoid making any fresh investments.
Source: https://www.thecore.in/podcasts/us-stocks-whacked-for-the-third-day-833088
