Indian equity benchmarks opened sharply lower on Thursday, May 20, extending losses for the third consecutive session as concerns over rising inflation and a global bond selloff weighed on investor sentiment. The BSE Sensex plunged 394 points to 77,250 in early trade, while the NSE Nifty slipped below the 23,500 mark to trade near 23,450.
Global Markets Drag Down Sentiment
The weakness in domestic markets mirrored a broad-based selloff in global equities. Asian markets tumbled after Wall Street ended lower overnight following the release of hawkish Federal Reserve minutes and stubbornly high inflation data. Japan's Nikkei fell over 1.5%, while Hong Kong's Hang Seng and China's Shanghai Composite declined by over 1% each. Rising bond yields in the US and Europe added to the risk-off mood, with the US 10-year Treasury yield climbing above 4.5% for the first time in three weeks.
Inflation Worries Dominate
Investors remain on edge after US consumer price index (CPI) data for April came in above expectations, stoking fears that the Federal Reserve may delay interest rate cuts. The minutes from the Fed's May meeting revealed that policymakers are prepared to keep rates higher for longer if inflation does not moderate. This has triggered a sharp selloff in rate-sensitive sectors globally, and Indian markets were not immune.
Back home, India's wholesale price index (WPI) inflation for April rose to 2.5% from 2.1% in March, adding to domestic inflationary pressures. The Reserve Bank of India (RBI) is expected to maintain its hawkish stance in the upcoming monetary policy review, which could further dampen market sentiment.
Sectoral Impact
All major sectoral indices were in the red, with banking, financial services, IT, and auto stocks leading the decline. The Nifty Bank index dropped nearly 1%, dragged down by losses in HDFC Bank, ICICI Bank, and State Bank of India. IT stocks also faced selling pressure amid fears of a slowdown in global demand and a stronger rupee. The Nifty IT index fell over 1.5%, with Infosys, TCS, and Wipro among the top losers.
Midcap and smallcap stocks also witnessed heavy selling, with the BSE Midcap index declining 1.2% and the BSE Smallcap index falling 1.5%. Analysts attribute the broader weakness to valuation concerns and profit-booking after the recent rally.
Expert Views
Market experts believe that the near-term outlook remains cautious. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "The combination of rising bond yields, elevated crude oil prices, and persistent inflation worries is creating a challenging environment for equities. Investors should adopt a defensive strategy and focus on quality stocks."
Deepak Jasani, Head of Retail Research at HDFC Securities, added, "The Nifty is likely to find support around the 23,300-23,400 zone. Any further weakness could be an opportunity for long-term investors to accumulate fundamentally strong stocks."
Outlook
Going forward, market participants will closely monitor global cues, including the trajectory of US bond yields and the outcome of the upcoming OPEC+ meeting, which could influence crude oil prices. On the domestic front, quarterly earnings reports from major companies and the progress of the monsoon season will be key factors to watch. With inflation concerns likely to persist, volatility is expected to remain elevated in the near term.
As of 9:30 AM IST, the Sensex was trading at 77,250, down 394 points or 0.51%, while the Nifty was at 23,450, down 120 points or 0.51%. Broader market indices also traded in the red, with the BSE Midcap and Smallcap indices declining over 1% each. The market breadth was negative, with about 1,800 stocks declining against 900 advancing on the BSE.
