Indian markets on Wednesday dropped for the second day running as investors took a breather after recent gains. The markets rose between March 25 and April 4 on the improving key macroeconomic data and falling crude oil prices. In that period, both the Sensex and Nifty gained over 5.5 percent.
Global markets were trading lower after hawkish comments from US Federal Reserve governor Lael Brainard. At 1.45pm, the benchmark Sensex had fallen 0.8 percent to 59,677 points while the Nifty dropped 0.77 percent to 17,820 points.
"Markets continue to remain jittery as investors try to gauge the effects of the Russia-Ukraine war whilst simultaneously mulling over the possibility of the Fed raising interest rates even further to curb inflation. Additionally, rising oil and commodity prices are threatening supply chains and logistics by disrupting shipping and air freight. The Chinese economy continues its battle with rising coronavirus infections. While the world awaits the resolution of the Russia-Ukraine crisis, over the near term devastation due to the war and additional sanctions on the Russian economy would have menacing effects on global and Indian equities," said Mitul Shah, head of research at Reliance Securities.
Here are some of the he key reasons why markets fell for a second session:
Hawkish US Fed: Global markets fell after the Fed’s Brainard said the US central bank will shrink its balance sheet rapidly as soon as May. The Federal Open Market Committee “will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting”, Brainard said on Tuesday in a virtual speech to the Minneapolis Fed. Policymakers next meet on May 3-4.
RBI policy meeting starts: Investors avoiding taking long positions ahead of the key Reserve Bank of India bi-monthly policy at which it is widely expected to keep key rates on hold. Market participants will be keeping an eye on the RBI policy statement amid expectations of unchanged rates.
Fresh sanction on Russia: The U.S., European Union and Group of Seven are coordinating on a fresh round of sanctions on Russia, including a US ban on investment in the country and an EU ban on coal imports, following the discovery of civilian murders and other atrocities in Ukrainian towns abandoned by retreating Russian forces
China lockdown: China’s Covid-19 situation is on a knife’s edge, and a lockdown of its financial hub Shanghai intensified amid a surge in new cases and reports of new sub-strains of the omicron variant emerging as clusters flare nationwide. Bloomberg Economics analysts say Covid lockdowns and the war on Ukraine mean China’s growth will likely miss the Chinese government's 5.5 percent goal even with stronger policy support.
(With inputs from Bloomberg)
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