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NEW DELHI : Overnight weakness in the US markets, the spread of covid in China, expected steep interest rate hikes in the US, rising inflation, and the Russia-Ukraine war are adding to concerns on global economic growth resulting in the Sensex and the Nifty ending down 0.94% each on Wednesday.

“The market continued to be gripped by high volatility following a heavy sell-off in the global markets led by the elevated energy crisis and weak Chinese economic outlook underpinned by prospects of US rate hikes," said Vinod Nair, head of research at Geojit Financial Services.

Nair feels that investors are weighing the possibility of a global slowdown because of monetary tightening by central banks, a lockdown in China, and the Russia-Ukraine war. This has resulted in an outflow of funds from equity markets to safe havens, according to Nair.

Asian indices also traded weak on Wednesday. Taiwan, Jakarta Composite, and Nikkei ended the day down 0.49%- 2.05%. Shanghai Composite and Hang Seng, though, reb-ounded and closed 2.49% and 0.06% higher, respectively.

“Asian markets were back in negative territory on Wednesday following a rout on Wall Street as traders are faced with a perfect storm of crises including China’s covid-linked economic woes, US rate hikes, soaring inflation, and the Ukraine war," said Deepak Jasani, head of retail research, HDFC Securities Ltd.

Mainland Chinese stocks rebounded as Beijing redoubled confidence-boosting efforts with promises of more support for the slowing economy, Jasani said. The “all-out" stimulus pledges by China and a string of corporate earnings releases helped boost sentiment and leading to advances in European shares in early trades after a retreat in Asia.

The real worry for markets now is a possible sharp global slowdown triggered by likely aggressive monetary tightening in the US, severe covid-related lockdowns in China, and woes in the eurozone because of the Russia-Ukraine war, according to experts. The dollar index moving above 102 and the US 10-year bond yield dipping to 2.7% reflect the growth slowdown fears, said V.K. Vijayakumar, chief investment strategist, Geojit Financial Services.

The weak Q4 earnings season and rising inflation are also adding to woes. High crude and commodity prices will also continue to pose challenges.

“As has been the trend for the last few months, the outlook for earnings in FY23 has continued to deteriorate," said S. Hariharan, head, sales trading, Emkay Global Financial Services. Thus far, the trend of the Q4 earnings season has pointed to disappointments and severe stock reactions to earnings misses.

Restrictions on Indonesian palm oil exports would pose input cost challenges for all fast-moving consumer goods companies, Hariharan said. The sector faces the highest risk of earnings downgrades in this quarter.

Fuel and commodity cost pressures would also impact earnings for cement and consumer durables companies.

Crude oil continued to trade firm. Brent was trading at near $104 a barrel level on Wednesday. This is adding to pressure on the rupee. However, the decline in the US bond yields has been leading to support for rupee.

“USDINR spot closed 5 paise lower at 76.52, on the back of exporter selling. The pullback in US bond yields also helped. the Indian rupee has emerged as one of the strongest currencies this year," said Anindya Banerjee, vice-president, currency derivatives and interest rate derivatives at Kotak Securities Ltd.

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