Markets give up 2022 gains | The Financial Express

Markets give up 2022 gains

Global stocks drop to 2-year low on prospect of higher US rates.

Markets give up 2022 gains
Volumes on NSE were the lowest since September 12 on Friday. (IE)

The stock market indices slid for a third straight day on weak global cues, erasing all the gains made this year. As the Sensex slid 1.7%, or 1,021 points to 58,099, it is now 154 points below the December 31 closing of 58,253. The Nifty 50 settled at 17,327, down 1.7%. At this level, it is 26.65 points below the 2021-end closing.

Friday’s drop led to an erosion of nearly Rs 5 trillion in market cap of BSE firms. Foreign portfolio investors sold shares worth Rs 2,900 crore on Friday, provisional figures show. In the year to date, the investors have net sold $20.3 billion.

Volumes on NSE were the lowest since September 12 on Friday. All sectoral indices ended in the red, with Realty, Power, Banks, Capital Goods and Telecom being the laggards. The advance decline ratio ended stood at 0.24:1.

Also read: Sensex, Nifty erase all yearly gains; Nifty support at 17166, investors poorer by Rs 5 lakh crore

Among the 30-share Sensex pack, Power Grid slumped 7.93%. The other major laggards were Mahindra & Mahindra, State Bank of India, Bajaj Finserv, Bajaj Finance, NTPC, HDFC and IndusInd Bank. Sun Pharma, Tata Steel and ITC were the only gainers.

Global stocks hit two-year lows on Friday as investors digested the prospect of a far more aggressive rise in US interest rates. Korea’s Kospi (1.8%) and Hang Seng (1.2%) slid the most among Asian indices on Friday. European indices were trading deep in the red, down more than 2% as of 6 pm IST.

Goldman Sachs slashed its year-end target for the S&P 500 Index to 3,600 from 4,300, citing a higher interest-rate path from the Federal Reserve, while strategists gave up on a year-end rally for European stocks as private-sector activity in the region continued to contract.

“I don’t think there has been a single year where Western markets and India have actually gone in opposite directions. Beyond a point we cannot decouple from the rest of the world,” said Samir Arora, founder, Helios Capital, in a webinar on Friday.

Also read: Tata Steel shares jump, TRF hits lower circuit, Tinplate, Tata Metaliks fall after board okays mega merger

India equities so far have remained insulated from the higher inflation and slower growth worries, and have materially outperformed global peers, with the MSCI India delivering total returns of +3.3% on a year-to-date (YTD) basis compared to the MSCI World and the MSCI Asia ex Japan total returns of -19.7% and -21.4%, respectively.

“With interest rates rising globally, however, and the global growth environment incrementally becoming more challenging, equity valuations could come under pressure. While we continue to believe India remains in a sweet spot and could likely continue to command a valuation premium versus peers due to superior fundamentals, some caution and risk management are warranted at current levels,” said Jitendra Gohil, head of India Equity Research, Credit Suisse Wealth Management, India.

Arora believes the US is headed for a recession and there is unlikely to be a soft landing for the economy. He also feels the rate hikes in the US, which are likely to continue in 2023, will compel the RBI to increase rates as well. “If the US raises rates by 175 basis points the RBI will have to go for at least 100 bps,” Arora said.

The six-member Monetary Policy Committee is scheduled to meet from September 28-30.

“With the latest round of interest rate tinkering by the US central bank, investors have turned risk averse and are dumping shares at will. Traders are also worried about the escalation in Russia-Ukraine conflict, which is prompting them to exit equities and park funds in safe haven dollar assets,” said Amol Athawale, deputy vice president – Technical Research, Kotak Securities.

Technically, the Nifty has formed a lower top formation on daily charts and long bearish candle on daily charts which is broadly negative. “For positional traders 17500-17600 levels could act as a crucial resistance zone. On the flip side, the 50-day SMA (simple moving average) or 17250 would be the important support level. If the index closes below the 50-day SMA, it could retest the level of 17150 and could retreat further till the 200-day SMA or 17000,” said Athawale.

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