Sensex slips over 1,000 points on inflation worries; Tech Mahindra down 4%

NEW DELHI: Dalal Street stocks sank on Thursday morning, as concerns over high inflation eating into corporate profitability renewed selling pressure on Wall Street overnight, sending Asia deep in the red.

Weak quarterly results elsewhere, including that of internet giant Tencent in China, added fuel to the fire.

A 25 per cent single-day plunge in shares of US retailer Target following its bleak results and commentary, and a consistent fall in bigger rival Walmart, was a reminder that ignoring inflation is no option now and steep earning downgrades globally are a real possibility.

At 9.20 am, the BSE Sensex was trading 1,059.69 points or 1.95 per cent lower at 53,148.84. The index fell 1,155 points in early trade to hit a low of 53,053.75. Nifty50 was trading at 15,926.25, down 314 points or 1.93 per cent. Midcap and smallcap indices fell up to 2.6 per cent.

"Toxic trifecta of multiple compression (P of P/E getting adjusted lower or multiple de-rating ), cost-led margin compression and impending slowdown in sales growth where the lethal combination of the last two factors, is leading to fears of estimated earnings or 'E' of P/E getting slashed," said independent market analyst Ajay Bodke.

To recall, earlier this week, US Federal Reserve Chair Jerome Powell had said the central bank would raise interest rates until there is "clear and convincing" evidence that inflation is in retreat.

On the other hand, the minutes of the recent MPC policy review on Wednesday suggested frontloaded rate hikes ahead. Nomura India now expects a 50 basis points hike in June meet against 35 basis points earlier.

While a rising inflation eats into corporate profit, any rate hike by central banks to tame inflation generally hits consumer demand. As such, there are concerns that the US economy, which shrank 1.4 per cent in March quarter, could enter recession soon.

Among Sensex stocks, tanked 3.86 per cent to Rs 1,127.20. declined 3.84 per cent to Rs 1,451.75. declined 3.74 per cent to Rs 463.25. and declined 3-3.5 per cent.

fell 3.32 per cent to Rs 1,141.1o. Stocks such as , , , , and dropped 2-3 per cent. remained the sole gainer, rising 1.59 per cent to Rs 270.75 post Q4 beat.

Meanwhile, the domestic currency hitting new low and foreign equity outflows in May topping Rs 30,000 crore-mark also hurt the market sentiment. Foreign outflows stood at Rs 1,57,556 crore so far in 2022.

Earlier in the day, Chinese internet giant Tencent also took a beating, plunging over 8 per cent as profit halved. Asian markets were down up to 3 per cent in early trade, before recovering some ground.