Indian equity benchmarks opened in the red on the first trading day of October, tracking a fall in Asian equities after a surge in oil prices on expectations oil producers would likely cut production, raising higher inflation worries.
The 30-share BSE Sensex index was down 288.8 points to 57,138.12 in early trade, and the broader NSE Nifty-50 index declined 79.4 points to 17,014.95.
That comes after both benchmarks surged on Friday after the Reserve Bank of India hiked interest rates to a three-year high and reassured the country's economic growth was better placed than peers.
As a negative mood lingered in the markets amid concerns that global central banks will keep rising rates until inflation is controlled, increasing the possibility of a recession, stocks in Asia struggled to gain traction and US equity futures wavered.
The MSCI index of Asia-Pacific shares outside of Japan was down 0.43 per cent on the opening trading day of the quarter, on pace to fall for a fourth straight day.
In Japan, stocks saw modest increases while falling in Hong Kong and Australia. Trading in Asia is likely to be muted due to a holiday on Monday in Sydney and South Korea and the week-long closure of Chinese markets for Golden Week.
"Given the holidays, trading is likely to be thin," noted ING's Regional Head of Research Robert Carnell.
This comes after a week of market instability, during which worries about a global recession drove down stocks, and the dollar's strength rocked currency markets. Asian shares fell on Friday, marking their biggest monthly loss since the pandemic's start in 2020.
With the Organization of the Petroleum Exporting Countries (OPEC+) considering a cut in production by more than 1 million barrels per day when it meets this week, oil prices surged over 3 per cent to trade near $82 a barrel.
That will likely increase the possibility of increased inflation, leading central banks to adopt more aggressive policy measures.
After US markets suffered their third consecutive quarter of losses for the first time since 2009, the week started cautiously. Since the Federal Reserve announced a third jumbo hike last month, risk markets have been in free fall, and officials have frequently warned of more pain to come, even at the expense of a recession.
"Risk off seen from multiple forces heading into the new month or quarter as corporate earnings misses continue to raise the threat of an ugly earnings season ahead," a group of Saxo Capital Markets analysts wrote in a note.