Following a flat start, the Indian equity market fell sharply on January 4 as global macro concerns took the centre stage and investors booked some profit.
By noon, the Sensex was down 638.80 points, or 1.04 percent, to 60,655.40, and the Nifty lost 191 points, or 1.05 percent, to 18,041.50. About 980 shares had advanced, 2177 shares declined, and 127 shares were unchanged.
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Globally, investors are keenly monitoring minutes of the Federal Open Market Committee (FOMC) December meeting that will indicate the signs of interest rate hike trajectory in the new year. The minutes will be released later tonight.
Let’s take a look at the factors that dragged the markets down today.
At the conclusion of the December 13-14 meeting of the FOMC, interest rate was hiked by 50 basis points (bps) to a target range of 4.25 percent to 4.5 percent. While this was a stepdown from 75bps, policymakers published new projections on higher inflation expectations.
Officials now see inflation ending 2023 at 3.1 percent, according to their median projection, compared with 2.8 percent in the previous quarterly forecast released in September.
Wall Street off to a weak start in 2023
On Tuesday, which was the first trading session of 2023 for Wall Street, the Nasdaq shed 0.76 percent, while the Dow Jones Industrial Average and S&P 500 dipped 0.03 percent and 0.4 percent, respectively.
Six of the 11 major S&P sectors closed lower, led to the downside by energy. This negative start came as a double whammy after Wall Street’s major averages notched their worst year since 2008.
Recession to hit a third of the world economy: IMF chief
International Monetary Fund chief Kristalina Georgieva has said that up to a third of the world could be in recession and even those countries that are not in recession would feel like recession for lakhs of people.
“The year 2023 will be tougher than the last year because the economies of the US, the EU and China will slow down,” she said in an interview to CBS.
Brent holds steady above $80/bbl
Oil prices have held their ground on Wednesday after declining in the previous session. Brent futures for March delivery rose 6 cents to $82.16 a barrel, a 0.1 percent gain. WTI oil was trading at $76.91 per barrel at 12 pm.
The Chinese government has raised export quotas for refined oil products in the first batch for 2023, signalling expectations of poor domestic demand. The dollar index gained ahead of the FOMC meeting minutes and crossed 104 levels once again.
“Markets have been moving in a narrow range of 18,000-18,200 over the past few days. Some sectors like banks and metals had witnessed buying, which are seeing profit-booking today,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.
The Nifty Bank is down 1.05 percent, Nifty PSU Bank is down 1.8 percent, and Nifty Metal is down 2 percent in trade. On the first trading day (January 2) of the new year, the metal index had outperformed all other indices on back of positive cues from China reopen.
“The Nifty is facing a strong resistance at 18,400 levels on the higher side but it has good support at around 18,080 – 18000 levels,” said Rohan Patil, technical analyst, SAMCO Securities.
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