Markets witness bloodbath in early deals; Sensex crashes over 1000 points

Indian equity benchmarks extended their previous session’s losses with gap-down opening on Thursday amid a global sell-off. Markets are trading deeply in red with cut of around 2% each in early deals due to selling in IT, TECK and Metal stocks which are down by over 3% each. Sentiments got a hit as the United Nations said India is expected to grow 6.4% in 2022, well below the 8.8% growth in 2021, as higher inflationary pressures and uneven recovery of the labour market are likely to curb private consumption and investment. Adding more pessimism, India Ratings and Research said the average headline inflation is set to accelerate to a nine-year high at 6.9 per cent in FY23, and the Reserve Bank may go for more rate hikes during the fiscal. It added that the RBI will hike rates by another 75 basis points and possibly up to 125 basis points (1.25 percentage point) as well if the turn of events and data are very adverse.

Weak global cues dampened the sentiments in local markets. Most of the Asian markets are trading lower following the carnage in the global markets overnight, with Wall Street booking the biggest loss in 2 years on weak crude oil prices and disappointing quarterly results from some major retailers that raised concerns about persistently rising inflation, economic slowdown and rising prospects of sharper interest rate hikes.

Back home, edible oil industry stocks were in focus as Solvent Extractors' Association of India (SEA) said oilmeals export increased by 10 per cent in April to nearly 3.34 lakh tonnes on higher shipments of rapeseed meal. In scrip specific developments, Manappuram Finance slipped on weak Q4 results. Also, Lupin fell on disappointing March quarter results.

The BSE Sensex is currently trading at 53125.71, down by 1082.82 points or 2.00% after trading in a range of 53053.75 and 53356.04. There were 1 stock advancing against 29 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 2.25%, while Small cap index was down by 2.23%.

The top losing sectoral indices on the BSE were IT down by 3.84%, TECK down by 3.57%, Metal down by 3.25%, Realty down by 2.61%, Basic Materials down by 2.52%, while there was no gainer on BSE sectroal front.

The only gainer on the Sensex was ITC up by 3.55%. On the flip side, Tech Mahindra down by 4.86%, Infosys down by 4.46%, Bajaj Finserv down by 3.98%, Wipro down by 3.72% and Indusind Bank down by 3.63% were the top losers.

Meanwhile, expressing optimism over India’s economy, Moody's Analytics in its latest report has said that the country’s economy is back on track after the pandemic and it does not expect the military conflict (in Ukraine) to derail the recovery. Several months into the conflict, fears over the impact have moderated. It said ‘following a robust rebound of over 9 per cent in the year ending March 2022 (fiscal 2021), we expect real GDP to grow 8.2 per cent in fiscal 2022, the fastest expansion among G20 countries globally and partly reflecting ongoing base effects from pandemic-led disruptions’.

The report said the buoyant economy creates favourable operating conditions for the country's banks, besides their loan performance and profitability are improving, albeit from a low base. Capital and liquidity levels are also stable. It added the global economic fallout from the Russia-Ukraine military conflict will push up inflation and interest rates in India, and create supply constraints. India, as an agricultural economy, is a net food exporter but depends on significant agricultural imports such as palm oil. It noted that higher food prices will therefore directly affect inflation, while soaring fuel prices will have an even larger adverse impact. India's Consumer Price Index (CPI) was 6.1 per cent before the conflict and had risen to 7 per cent in March.

However, it said Indian banks are in better shape now than before the pandemic. Loan quality had deteriorated over the prior decade as a large proportion of the banks' corporate lending books turned sour. Corporate stress at that time was linked to multiple factors including slowing economic growth, over-indebtedness and poor governance. Since then, the banks have cleaned their balance sheets and non-performing loans (NPLs) are falling as a result. It added the asset-weighted average of rated banks' gross NPL ratios nearly halved to 5.7 per cent as of December 31, 2021 from a peak of 10.3 per cent at end of March 2018. The report said it expects the NPLs to decline further as banks make recoveries or write off legacy problem debt, while formation of new NPLs will be stable as the economy recovers.

The CNX Nifty is currently trading at 15919.40, down by 320.90 points or 1.98% after trading in a range of 15904.65 and 15984.75. There were 2 stocks advancing against 48 stocks declining on the index.

The only gainers on Nifty were ITC up by 3.77% and Eicher Motors up by 1.08%. On the flip side, Tech Mahindra down by 4.82%, Infosys down by 4.32%, Hindalco down by 4.00%, Bajaj Finserv down by 3.71% and Wipro down by 3.61% were the top losers.

Asian markets are trading mostly in red; Nikkei 225 slipped 516.28 points or 1.92% to 26,394.92, Straits Times fell 9.53 points or 0.30% to 3,215.82, Hang Seng plunged 469.85 points or 2.28% to 20,174.43, Taiwan Weighted declined 306.23 points or 1.88% to 15,990.63, KOSPI fell 31.21 points or 1.19% to 2,594.77 and Shanghai Composite lost 2.59 points or 0.08% to 3,083.39. On the other hand, Jakarta Composite was up by 33.12 points or 0.49% to 6,826.53.