NEW DELHI: The global equity rout whipsawed Indian benchmark indices on Thursday with the Sensex and Nifty erasing all of 2018 gains in just one trading session. The Sensex fell over 1,000 points, while Nifty hit the day’s low of 10,138, as Wall Street tumbled to its worst in eight months on Wednesday fearing rising inflation, slowing global growth and hardening US Treasury yields.
This sparked a sell-off of risky assets, annoying US President Donald Trump – who often takes the applause for positive market performance – and prompting him to put the blame on the Federal Reserve: “I think the Fed has gone crazy (by raising rates).”
The Wall Street jitters, and its spillover to Asian and European markets, comes just as the third-quarter earnings season begins, raising concerns if firms can deliver the anticipated runaway growth amid trade war tensions that could likely crimp profits.
On Wednesday, the S&P 500, Nasdaq Composite and the Dow all ended lower between 2 and 4 per cent, roiling Asian markets from Tokyo to Hong Kong who saw declines in excess of 3 per cent on Thursday.
The global equity rout also corrected commodities prices with Brent settling lower at $81.57 a barrel, while gold fell 0.2 per cent to $1,192.93 an ounce. Dollar weakened against all major peers, while the US long-term bond yields touched their highest in seven years.
Usually, a spike in US bond yields and strengthening dollar leads to a sell-off in emerging markets, which was visible in Indian markets Thursday.
Globally, Japan’s Topix index, Hong Kong’s Hang Seng Index, Shanghai Composite Index, South Korea’s Kospi index, and Australia’s S&P/ASX200 Index all fell. The euro zone STOXX index fell 1.2 per cent, while UK’s FTSE 100 was down 1.6 per cent.
US stocks continued to crack for the second day on Thursday. The Dow Jones Industrial Average tanked 650 points, bringing its two-day losses to more than 1,400 points. It had plunged 832 points on Wednesday on heavy sell-off in tech stocks.
Taking stock
China: China’s bourses were badly hit. The technology-heavy Shenzhen market slid 6.5%, while the Shanghai Composite slipped 5.2% — worst declines since February 2016
India: Domestic factors also caused Indian markets take a beating — rising crude prices, widening current account deficit, depreciating rupee and a rout in NBFC shares due to IL&FS crisis