Indian markets opened over 1% lower tracking a fall in global equities as investors remain concerned about the global economy while awaiting key data on US retail inflation.
At 9.55 am, the benchmark Sensex was down 1.3% or 711 points to 54608 points while the Nifty was 1.24% or 205 points lower at 16274 points.
This comes after the Dow Jones Industrial Average fell 1.94 percent, the S&P 500 lost 2.38 percent and the Nasdaq Composite dropped 2.75 percent overnight. Among Asian shares, Nikkei was down 1.3%, Hang Seng was trading flat, Topix down 1%, Kospi down 1.3%, Jakarta fell 1.2%, and the Philippines lost 2%.
"Global markets are falling as investors remain concerned about the global economy while awaiting key data about inflation. The combination of slowing growth and rising prices has raised concerns of stagflation where growth stalls but inflation drives up prices. Moreover, the Russia-Ukraine crisis continues to impact market sentiments," said Mitul Shah, head of research at Reliance Securities.
Here is a detailed look at the factors sending Indian markets lower:
India data: Investors will wait for April factory output data today and consumer price index data for May on Monday. A Bloomberg poll expects factory output for April to rise 5% year on year from 1.9% a month ago and CPI to grow 7.1% for May versus 7.79% in April.
US CPI data: Investors are waiting for US CPI inflation data for May today. They expect the US Federal Reserve to hike rates by 50 basis points next week, especially if data confirms an elevated inflation reading.
ECB meeting: The European Central Bank on Thursday confirmed its intention to hike interest rates for the first time since 2011 and downgraded its growth forecasts. ECB aims to raise key interest rate by 25 basis points at the July meeting and targets a further hike in the September meeting, saying the scale of that increment would depend on the evolving trajectory of the medium-term inflation outlook. It has also ended its bond buying stimulus.
Crude oil: Currently trading over $120 bbl fuelled by intensifying geopolitical tensions between Russia and Ukraine, and tightening by global central banks. As oil boils, India's current account deficit is likely to hit a three-year high of 1.8% or $43.81 billion in FY22, as against a surplus of 0.9% or $23.91 billion in FY21, according to India Ratings.
RBI policy: Reserve Bank of India signalled more rate hikes to come in its inflation fight. On Wednesday, RBI raised the key interest rate for a second straight month and pledged to withdraw the pandemic-era accommodation as it steps up its fight to tame prices that have been running above its target band since the beginning of the year. In the latest move, the rate setting panel unanimously raised the repurchase rate by 50 basis points to 4.90%.
Covid cases: Investors were also worried by Covid cases rising in India. The nation registered its highest daily spike in nearly three months with 7,584 new Covid cases as the country witnesses a fresh surge in several parts. Maharashtra, the state most affected, recorded 2,813 cases, the sharpest rise any state saw in 24 hours. This was followed by Kerala, which recorded 2,193 cases.