NEW DELHI: Both Indian indices, Sensex and Nifty, continued their downward slide on Wednesday, extending losses from the previous session.
The BSE benchmark Sensex opened over 600 points down and is trading at 66,985.36. The Nifty index has slipped below 20,000-mark and is trading at 19,968.
Within the Sensex companies, HDFC Bank recorded the most significant decline, with a drop of over 3 percent. Other major underperformers included Reliance Industries, Bharti Airtel, Maruti, Titan, and Hindustan Unilever. On the positive side, NTPC, IndusInd Bank, Axis Bank, and Mahindra & Mahindra were among the gainers.
Here are main reasons why markets are down:
This decline was in response to weak overnight performance in US markets, as well as the rising global crude oil prices, which were influenced by the strengthening of the US dollar.
The overall bearish sentiment was further exacerbated by foreign fund outflows and a downward trend in the key index heavyweight, HDFC Bank.
US Fed decision
Investors are also wary about the US Federal Reserves decision on rate hike. Investors are expected to exercise caution, closely monitoring the outcome of the US Federal Reserve’s decision to be announced this evening.
Analysts anticipate that the US Federal Reserve will opt to halt its interest rate hikes on Wednesday, aiming to curb inflation while steering clear of a recession, despite recent increases in consumer prices driven by energy costs.
With 11 interest rate hikes implemented since March of the previous year, inflation has notably declined but continues to hover above the Federal Reserve’s targeted long-term rate of two percent annually. This persistent inflationary pressure compels officials to contemplate further policy measures.
Higher oil prices
According to experts, the market faces several near-term challenges, including higher oil prices. On Tuesday, oil prices surged to their highest levels in 10 months due to concerns over weak US shale production, which added to worries stemming from prolonged production cuts implemented by Saudi Arabia and Russia.
The Indian economy is highly dependent on fuel prices as we import almost 80% oil to meet our energy requirements.
“The market is starting to realize that wherever you look there are concerns about tight supply, whether it’s crude oil, diesel or gasoline,” Price Futures Group analyst Phil Flynn told Reuters. “We’re getting a reality check.”
Elevated oil prices are expected to extend concerns about inflation, leading the Reserve Bank of India (RBI) to maintain its interest rate pause for an extended period. This development could disappoint hopes of lower Equated Monthly Installments (EMIs).
DK Joshi, the chief economist at Crisil, remarked, “If the sustained increase in crude prices continues, it can manifest in the headline consumer inflation figure through both direct factors, such as higher fuel prices, and indirect effects, including increased production and transportation costs.” Joshi also noted, “Fuel and core inflation have remained subdued at levels below 5%, and the inflationary spikes observed in July and August were primarily driven by food prices.”
(With inputs from agencies)