Benchmark equity indices closed lower on Tuesday, marking the third straight session of losses on raging inflation, and as traders braced for aggressive hikes from the Federal Reserve, with the biggest interest rate increase since 1994 already baked into bets.
Indian stock markets had another rough start on Tuesday after plunging in the previous two sessions. Wall Street hit a bear market milestone on fears of a looming recession.
Fears of higher rates leading to a US recession kicked the S&P 500 down by over 20 per cent from its most recent record closing high, a common definition of a bear market.
The 30-share BSE Sensex and the broader NSE Nifty turned green during the session on Tuesday.
But data showed the wholesale-based inflation measure stayed above double-digits for a 14th straight month and pushed Indian stocks lower on fears the Reserve Bank of India may have to order more interest rate hikes to curb soaring price pressures.
Indeed, the Sensex fell 153.13 points to close at 52,693.57, and the Nifty was down over 30 points at 15,741.95.
From the Sensex pack, IndusInd Bank, Tech Mahindra, Reliance Industries, Maruti, Hindustan Unilever, HDFC Bank and Asian Paints were the major laggards.
On the other hand, NTPC, UltraTech Cement, Bharti Airtel and M&M were among the gainers.
Since Russia invaded Ukraine in February, a crude oil and commodity prices surge has set inflation alight in many countries, forcing central banks to adopt aggressive monetary policy path.
The latest selloff on world markets was triggered on Friday by US data showing annual inflation to May shot up by 8.6 per cent, its fastest in over four decades.
Global stocks, crypto, junk-rated bonds and emerging markets plunged after several investment banks, including Goldman Sachs, flagged the possibility of a 75 basis points hike, which was almost fully priced in for Wednesday and would be the biggest increase since 1994.
Traders have also upped bets on how high-interest rates might rise, seeing them peaking around 4 per cent next year versus the earlier 3 per cent expectation, and that repricing has pummelled risk assets.
Recent days have also seen renewed a stampede for the safe-haven dollar, taking it to new 20-year peaks against a basket of currencies.
“Commodities prices are set on the global market, and prices are rising for countries close and far. Cost-push inflation is not transitory anymore,” noted Agnès Belaisch, chief European strategist at the Barings Investment Institute.