Stock markets begin on weak note as global inflation concerns grow

Sensex plummets 1,456.74 points to end at 52,846.70; Nifty plunges 427.40 points to 15,774.40.

In morning session, stock markets in India began on a weak note and plunged 1400 points amid inflation concerns and fears of aggressive interest rate hikes by the US Federal Reserve System, the. As the broader NIFTY went 2% lower below 15000, the 30-share BSE Sensex plunged over 1000 points to trade at about 52,990 when the week opened on Monday.

Overall sectors were trading in the red with realty and financials down over 3% each while midcap and smallcap indices shed over 2% each. The stocks of Bajaj Finserv, Bajaj Finance, ICICI Bank, State Bank of India, Reliance Industries, Kotak Mahindra Bank, Tech Mahindra, and IndusInd Bank took a hit as the 30-share BSE Sensex plunged.

Life Insurance Corporation of India shares will remain in focus on Monday as the lock-in period for anchor investors is set to end. The lock-in period for anchor investors is to end on June 13, following which such investors will be permitted to sell their existing shares in the market. On Monday, the shares fell for the tenth consecutive session as investors remained jittery over further selling pressure.

Market watchers said that the Sensex and Nifty opening effects on Dalal Street were primarily due to mood after a steeper-than-expected rise in US consumer prices in May fuelled fears of more aggressive interest rate hikes by the Federal Reserve System. The Ministry of Statistics and Programme Implementation, Government of India is also set to release retail inflation numbers for May later today.

On Friday, the US markets had ended lower with a steeper-than-expected rise in US consumer prices in May fuelling worries of a more aggressive interest rate hike coming up. The Dow Jones Industrial Average fell 880 points or 2.73 percent to 31,392.79; the S&P 500 lost 116.96 points or 2.91 percent to 3,900.86 and the Nasdaq Composite dropped 414.20 points or 3.52 percent to 11,340.02.

The US consumer price index (CPI) reported a 40-year-high, the largest year-on-year increase since December 1981. On Friday US Labor Department figures showed it to be 8.6% last month putting markets on alert that the Federal Reserve System would tighten policy for too long and cause a sharp economic slowdown.

On Monday, CNBCTV18 reported that the 30-scrip S&P BSE Sensex opened at 52,992.32, down over 1,300 points, or 2.41 percent lower. The broader Nifty opened 2.29 percent lower at 15,830.55. Abhilash Narayan, Senior Investment Strategist-Group Wealth Management, Standard Chartered Bank, was quoted by the channel as saying that he expected that the next 3-6 months could be volatile for the Indian stock market. “But there is still a high likelihood that Indian equities end up outperforming global equities given the stronger underlying growth dynamics,” Narayan was quoted as saying.

With the US Federal Open Market Committee set to meet on Wednesday, aggressive rate hikes are anticipated by investors. Besides this being a reason for the mood of the stock markets, the continued withdrawal of Foreign Institutional Investors from the Indian markets – close to Rs 14,000 Crore this month, rising COVID cases, global crude oil prices, and the rupee value continuing to slide are being seen as reasons contributing to the reaction of the markets.