Bloodbath on D-Street: Factors behind Sensex crash today

Benchmark indices crashed in early trade on Thursday amid weak global cues and inflation worries. Foreign institutional investors remaining in selling mode and elevated crude oil prices also weighed on sentiment.

The 30-share BSE Sensex tanked over 1000 points to hit an intraday low of 53,047.75. The NSE Nifty tumbled over 300 points to 15,848.10.

Wondering what's wrong? Let's have a look at the factors behind blood bath on Dalal Street!

Weak global cues

Wall Street stocks closed sharply lower and Treasury yields fell in Wednesday's volatile session as oil prices rallied and investors worried about the potential for an economic slowdown. US equity indexes had traded higher and lower during the volatile session as investors picked through US inflation data for clues about the Federal Reserve's rate-hiking path.

The Dow Jones Industrial Average fell 326.63 points, or 1.02 per cent, to 31,834.11, the S&P 500 lost 65.87 points, or 1.65 percent, to 3,935.18 and the Nasdaq Composite dropped 373.44 points, or 3.18 percent, to 11,364.24.

"Asian stocks fell Thursday after elevated US inflation bolstered the case for aggressive monetary tightening and sparked a slide on Wall Street," said Deepak Jasani, Head of Retail Research, HDFC Securities.

The Nasdaq held near an 18-month low hit earlier this week as investors dumped megacap growth stocks amid worries that rising rates will future cash flows.

Inflation worries

U.S. consumer price growth slowed sharply in April as gasoline prices eased off record highs, suggesting that inflation has probably peaked, though it is likely to stay hot for a while and keep the Federal Reserve's foot on the brakes to cool demand.

The consumer price index rose 0.3 per cent last month, the smallest gain since last August, the Labor Department said on Wednesday. That stood in sharp contrast to the 1.2 per cent month-to-month surge in the CPI in March, which was the largest advance since September 2005.

In the 12 months through April, the CPI increased 8.3 per cent. While that was the first deceleration in the annual CPI since last August, it marked the seventh straight month of increases in excess of 6 per cent. The CPI shot up 8.5 per cent in March, the largest year-on-year gain since December 1981.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services noted that inflation continues to be a major headwind for markets.

"Consumer inflation in the US in April coming at 8.3 per cent reinforces market's concern about aggressive rate hikes by the Fed and the possibility of a US recession in 2023," he said.

FIIs on selling spree

Of late, the foreign institutional investors (FIIs) have been on a selling spree. FIIs sold shares worth Rs 3,609.35 crore on May 11, and domestic institutional investors (DIIs) bought shares worth Rs 4,181.20 crore, as per provisional data available on NSE.

"Even though domestic institutional investors (DII) buying is more than foreign institutional investors (FII) selling now, that is not enough to lift sentiments in the market since the macro headwinds are strong," Vijayakumar added.

Morgan Stanley lowers India's GDP growth forecasts

Morgan Stanley has lowered its forecasts for India's economic growth in the next two fiscal years, saying a global slowdown, surging oil prices and weak domestic demand would take a toll on Asia's third-largest economy.

Gross domestic product growth will be 7.6 per cent for fiscal 2023 and 6.7 per cent for fiscal 2024, 30 basis points lower than the previous estimates, the brokerage said in a note dated Tuesday.

The cut reflects a pronounced economic impact from the Russia-Ukraine conflict that has driven up crude prices, pushing retail inflation in India - the world's third-biggest oil importer - to its highest in 17 months.

(With inputs from agencies)