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Indian stock markets fell sharply today with Sensex slumping over 1,000 points and turning negative for the year. Global stocks fell for a third day today on fears of a possible global recession after rate hikes by the Federal Reserve and other central banks to control inflation. Investors worry central banks might be willing to tolerate a painful economic slump to get prices under control. At day's low, Sensex fell to 57,981.

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.

Sensex finished the day at 58,098, down 1,020.80 points while NSE Nifty plummeted 1.72% to end at 17,327.

"A rise in the US 10-year bond yield and a strong dollar index influenced FIIs to flee emerging markets. A fall in liquidity in the banking system, a weak currency and a current premium valuation have set the market outlook bearish for the near term. With aggressive monetary policy action by central banks, the global growth engines are in a slowdown mode, whereas India is currently in a better position with a pickup in credit growth and an uptick in tax collection. The current volatility might persist for a while. Investors are advised to wait and watch until the dust settles," said Vinod Nair, Head of Research at Geojit Financial Services.

 

The US Fed on Wednesday lifted its benchmark rate and signalled that it expects that benchmark rate to be 4.4% by the year’s end. Central banks in Britain, Sweden, Switzerland and Norway also hiked interest rates.

“Domestic and international equity markets this week reacted to Federal Reserve’s 75 bps rate hike decision. Crude oil prices have broadly remained stable but the Indian currency have depreciated in recent days. For the domestic market, one of the key near-term event to watch out for is the upcoming RBI monetary policy," said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.

The rupee today hit a new low, breaching the 81 mark against the US dollar. Foreign investors net sold $152 million worth of Indian equities this week as of Thursday, after buying net $819 million worth last week.

“Rupee fell to fresh all-time lows against the US dollar after the Fed raised rates earlier this week. Most of the currencies are under pressure as the dollar continues to strengthen," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.

Financials tumbled in today's selloff. The Bank Nifty index fell nearly 2.5%.

“Near-term banks should under-perform as rupee and bond yields re-adjust. However, credit growth estimates will be revised upwards and hence not sure whether correction will be deep enough to trade," Emkay Global Financial Services said.

Indian government bond yields surged for a second straight week, as the hawkish stance of the U.S. Federal Reserve fuelled expectations of the Reserve Bank of India keeping pace with larger and longer rate hikes. The benchmark Indian 10-year government bond yield ended at 7.3926%, after closing at 7.3118% on Thursday.

“India's economic resilience and high frequency indicators are rock solid. Exports will weigh down on growth a bit later in the year. Indian markets should outperform but absolute out-performance is unlikely. 5-7% cut and time correction from the recent Nifty highs of 18,100 is more likely," it added.

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