Stock Market Selloff
Dalal Street went into the red on Friday as all sectors, except information technology, continued to bleed.
The Nifty 50 index hit an intraday low of 17,008.30 points, and at 11:35am, it was trading 1.2 percent lower at 17,037.55 points. The Sensex, on the other hand, plunged to 57,122.83, and was trading 1.2 percent or 703 points lower at 57197.54 at the time.
Auto, oil and gas, and realty stocks remained major drags on December 18, down 2.05 percent, 2.06 percent, and 2.6 percent, respectively, on the NSE.
Catch all the live market action here
On the Nifty 50, 44 out of the 50 stocks were trading with losses pulled back by losers like Tata Motors, IndusInd Bank, Titan, Bajaj Finserv and Reliance Industries. Out of the gainers, four belonged to the IT sector.
The Nifty IT index continued to hold on to gains, with the index up 1.43 percent. Almost all the components on the IT index were in the green, with Infosys leading the pack.
Also read: Five large-cap funds that beat the Nifty 100 TRI over one and three-year periods
Broader markets were hit harder with the Nifty Midcap 100 down 1.6 percent and the Nifty Smallcap 250 down 1.53 percent.
After four sessions of losses, the benchmark indices had closed in the green on December 16, but the market could not hold on to those gains.
What could be the reason behind the downhill drive? Let’s take a look at the factors that weighed on the equity markets on Friday:
Weak Global Cues
Most Asian markets were in the red today as they factored in the implications of hawkish central banks and rising cases of Omicron variant of Corona virus.
Also read: Indiabulls Housing Finance: What should you do after promoter stake sale?
While Japan’s Nikkei 225 was down over 500 points or 1.7 percent, Hong Kong’s Hang Seng was down over 270 points or 1.1 percent.
Geopolitical tensions following the US sanctions on China over human rights issues also weighed on the benchmark indices in the republic, with the Shanghai Composite down nearly 40 points or over 1 percent.
Omicron Concerns
Surging cases of the Omicron Corona virus variant across several countries gave rise to fresh economic growth concerns as new curbs could hit activity and travel.
Also read: Why MedPlus Health Services IPO attracted strong interest from QIBs, HNIs
In Denmark, South Africa and the UK, the number of new Omicron cases has been doubling every two days. In the US, the rapid spread of the Omicron variant has led some companies to pause plans to get workers back into offices.
Experts have said that the variant is spreading 70 percent faster than the previous variants, but the cases are not as severe as earlier variants.
In India, cases of Omicron variant rose to 83 after Karnataka, Delhi and Gujarat together reported 10 new cases.
Weak US Economic Data
Even though industrial output in November in the US saw strong growth, experts believed it was below estimates.
It reported growth of 0.5 percent against estimates of 0.7 percent. On a year-on-year basis, it grew 5.3 percent, and is the highest reading since September 2019.
Also read: Budget 2022 | Levels of fiscal consolidation key for foreign investors, says Emkay Wealth’s Joseph Thomas
Unemployment claims rose more than expected last week. Initial filings for unemployment insurance for the week ended December 11 totalled 206,000, above the 195,000 Dow Jones estimate and a gain of 18,000 from the previous week’s upwardly revised 188,000.
Hawkish Central Bank Surprises
Equity markets in emerging nations seem to be digesting the hawkish stance coming in from several central banks, including the US Federal Reserve.
The Fed said in a policy statement on December 15 that it was greatly reducing its massive bond-buying programme, and doubling its taper to $ 30 billion per month.
Also read: Tech stocks buck the trend after Accenture reports strong Q1
The next day, the European Central Bank further cut its bond purchases, but vowed to continue its unprecedented monetary policy support for the euro zone economy into 2022.
Meanwhile, the United Kingdom’s central bank became the first in a major advanced economy to raise interest rates since COVID hit.
Tightening of liquidity in developed markets would force investors to pull back money from emerging markets as developed markets become more attractive with narrowing interest differential.
Also read: World coal power demand to hit new high after China, India, US surge: IEA
Continued FII Selloff
FIIs continued to sell, as net outflow on December 16 in the cash market stood at Rs 1,468 crore, even as DIIs net purchased Rs 1,533 crore.
FIIs have sold over Rs 24,600 crore so far this month, the highest for any month this year.
