Indian equity benchmarks fell for the third straight session on Tuesday, tracking a broader slump in fragile global stock markets with worries about higher borrowing rates, global recession risks and geopolitical tensions unsettling investors.
The BSE Sensex index fell about 90 points, and the broader NSE Nifty index was down 0.2 per cent, marking the third session of losses in a row.
In the previous session, both equity benchmarks closed lower but had pared steep losses from earlier on Monday.
Following a fourth consecutive decrease in US stocks, shares fell in Asia amid ongoing worries that rising interest rates and geopolitical threats will hamper global economic growth.
As trading resumed after the holidays in the wake of new restrictions on China's access to US technology, stocks fell in Japan, South Korea, and Taiwan, with chipmakers leading the decline. Hong Kong shares continued to fall, and US futures declined.
A measure of dollar strength held near the highest this month as the market mood remained risk-averse.
"Our expectation for the world economy to enter recession next year is consistent with further gains in the dollar," said Commonwealth Bank of Australia strategist Carol Kong.
Investors sentiment remained shaky ahead of India's inflation data and Thursday's US inflation statistics.
If the US data comes in hotter than anticipated, the case for another 75 basis-point rate hike will certainly be compelling.
The World Bank and IMF presidents warned of a growing threat of a global recession as industrialised economies slow and greater inflation drives the Fed to keep hiking interest rates, increasing the debt strain on developing nations.
"A recession is very possible - our subjective probability over the next year is 35 per cent - but we think it would require additional shocks," Jan Hatzius, Chief economist at Goldman Sachs Group, wrote in a note, according to Bloomberg.
Renewed upward pressure on fuel prices is an area to watch, and Goldman also sees "a small but growing risk of an unnecessary monetary policy overshoot if Fed officials focus too much on lagging inflation indicators."
Demand concerns, especially in China, weighed on oil prices, with benchmark crude showing a decline on Tuesday from their recent highs.