The sell-off in Indian equity benchmarks extended to the sixth straight session on Wednesday, reflecting a broader global risk-off mood after Federal Reserve policymakers reiterated their resolve to tighten policy even at the cost of a recession.
The BSE Sensex index fell 509.24 points to end at 56,598.28, and the NSE Nifty declined 148.80 points to close at 16,858.60.
“Markets remained choppy with a sharply downward bias, as investors exited banking and metal stocks ahead of the monthly F&O expiry with the likely rate hike by the RBI & other central banks indicating that bearish sentiment could continue going ahead," said Shrikant Chouhan, Head of Equity Research for Retail at Kotak Securities.
Erratic trading in Indian equities on Wednesday coincided with a slump in Asian counterparts, with the Sensex plunging to a low of 56,498.72 points in the morning session after falling sharply to 56,710.13 points to start the day.
In the afternoon session, the markets recovered. The Sensex saw a brief uptrend and reached a high of 57,213.33 points before turning red again.
Both benchmarks have come under extreme selling pressure for the sixth session running.
Global markets hit two-year lows as investors rushed for the safe-haven dollar as borrowing prices rose and the energy crisis worsened, fueling concerns that the world could enter a recession.
In the past week, central banks worldwide raised interest rates and vowed to do all it takes to combat soaring inflation, especially as the next winter in the northern hemisphere runs the risk of deepening a global energy shortage.
"Inflation has surprised to the upside everywhere, and US dollar strength is becoming a headache for global central banks," Ugo Lancioni, Head of Global Currency at Neuberger Berman, told Reuters.
This year's dollar supremacy has made matters worse by driving up everyone's import costs for food and energy, except for the United States, by the billions.
"The energy supply shock has prompted a terms-of-trade crisis for all energy importing countries. The US dollar is probably entering an 'overshooting' phase driven by risk aversion, lower global growth and higher US real rates," added Ugo Lancioni.
The MSCI All-World index dropped by 0.7 per cent, marking a seventh straight day of declines, to reach its lowest level since November 2020. It is heading for a 9 per cent decline in September, which would be the biggest monthly decline since March 2020's 13 per cent fall.