Nifty drops 5% in five sessions, to a new 11-month low

15 Jun 2022 , 10:16 AM

Concerns about fast rate rises and their economic consequences continued to unsettle markets on Tuesday (14-06-2022), sending the major indexes down for the sixth day.

The benchmark Sensex gained some gains throughout the day but couldn't hang on to them, falling 153 points, or 0.3 percent, to 52,693.57. The Nifty50, on the other hand, finished the day at 15,732, down 42 points or 0.27 percent from its previous close. The 50-share index closed at its lowest level since July 28, 2021, after five days of losses during which the Nifty dropped 780 points or 4.73 percent.

Inflationary pressures have led central banks throughout the world to tighten their monetary policies and raise interest rates. The sell-off this week was sparked by US inflation, which hit an all-time high of 8.6% in May, the most in 41 years.

On Monday, the 10-year US bond yield hit 3.2 percent, its highest level since November 2018. Investors are dumping risky assets because they are concerned that the central bank rate rises would force economies into recession.

Foreign portfolio investors (FPIs) sold shares worth Rs 4,500 crore on Tuesday, bringing their month-to-date sales total to $3 billion.

On June 14 and 15, the US Federal Reserve is likely to hike interest rates by 50 basis points. However, higher-than-expected inflation data has fueled speculation that the Federal Reserve may contemplate a 75-basis-point rate rise. Some analysts have proposed a 100-basis-point increase.

Jerome Powell, the chairman of the Federal Reserve, has allowed that the unemployment rate may rise somewhat. In addition, he believes the central bank will only be able to give a "softish" landing for the economy.

"The US Fed's decision, as well as its comments on Wednesday, will set the tone for market direction in the short term." The global high inflationary climate, new Chinese regulations, and rising crude oil prices are all expected to put markets under pressure for the foreseeable future.

On the domestic front, continuous FII sell-offs, along with a weak rupee, are lowering investors' risk appetite," said Motilal Oswal Financial Services' head of retail research, Siddhartha Khemks.