Powell hangover wipes off Rs 2 lakh crore from D-Street! Key factors behind today’s fall

A back-to-back four-day fall in US stocks spooked domestic investors on Thursday, as bourses resumed trading after a public holiday. Concerns over aggressive Fed rate hikes weighed on stocks globally and the domestic market was no exception. Data showing a 13.5 per cent growth in GDP could add little to lift sentiment.

Within a few minutes of trading, the BSE market capitalisation fell Rs 1.91 lakh crore to Rs 278.33 lakh crore from Rs 280.24 lakh crore on Tuesday.

The BSE Sensex tumbled over 850 points while Nifty50 tested the 17,500 level in early trade. Here are the factors weighing in on the market:

US selloff
While the domestic market was closed on Wednesday on account of Ganesh Chaturthi, US stocks continued to tumble for the four session. On Thursday also, S&P500 futures were trading 0.70 per cent lower at 3,928 level, signalling another day of weak start for Wall Street stocks.

Tracking it, SGX Nifty futures were trading around 17,450 level earlier in the day against Nifty50’s closing of 17,759.30, hinting at huge gap-down opening for the NSE barometer.

Asian market cues
Asian shares were trading mostly lower on Thursday, tracking the broad slide on Wall Street, as investors braced for higher interest rates and inflation worries for some time. Benchmarks fell in Tokyo, Sydney, South Korea and Hong Kong in early trading, but edged up slightly in Shanghai.

Japan's benchmark Nikkei 225 declined 1.5 per cent in morning trading to 27,673.14. Australia's S&P/ASX 200 dropped 1.7 per cent to 6,865.60. South Korea's Kospi shed 1.7 per cent to 2,429.75. Hong Kong's Hang Seng lost nearly 0.8 per cent to 19,799.92, while the Shanghai Composite edged up 0.3 per cent to 3,212.96.

Factory activity
Asia's factory activity slumped in August as China's zero Covid curbs and cost pressures continued to hurt businesses, surveys showed on Thursday, darkening the outlook for the region's fragile economic recovery. Manufacturing activity was weak in countries ranging from Japan, China, South Korea to Taiwan in a sign sluggish demand was adding to headaches for companies already suffering from lingering supply constraints.

On the other hand, the Chinese city of Chengdu will conduct mass Covid-19 testing from Thursday to Sunday, its city government said on Thursday. Earlier it was reported that several areas of Guangzhou and Shenzen in the south stepped up their Covid-19 restrictions.

Weak rupee
The rupee declined 3 paise to 79.55 against dollar in early trade. The dollar index was hovering near 109 and Asian currencies were broadly lower. Risk aversion and high Treasury yields boosted demand for the safe haven dollar. Dollar has an inverse relationship with equities. The likelihood that the Fed's continued fast pace of rate hikes will push an economic downturn, has been weighing on demand for risky assets, Reuters reported. Fed officials have pushed against expectations of a slower pace of rate hikes and that the US central bank will cut rates later next year, it noted.

Technical factors
After a sharp rally on Tuesday, the index close to its immediate resistance zone of 17,815-17,900. Analysts were largely expecting a short term consolidation in the broad range of 17,200-18,000. The immediate support was placed at 17,600 level, which the index breached in the early trade, only to bounce back a bit.

“If there is no aberration on the global front, any small decline in the coming session should ideally be bought into,” said Sameet Chavan of Angel One.

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