Indian equity benchmarks slumped on Wednesday, extending losses for the fourth straight day after the Reserve Bank of India hiked rates at a more modest pace but lowered its growth outlook even as it said the fight against inflation was not over yet.
The 30-share BSE Sensex index fell 215.68 points, or 0.34 per cent, to close at 62,410.68, and the broader NSE Nifty-50 index declined 82.25 points, or 0.44 per cent, to end at 18,560.50.
After see-sawing between gains and losses in early trade on Wednesday, both indexes fell as the RBI hiked rates for the fifth consecutive time and warned that inflation, while having likely peaked, is still elevated and the central bank is focussed on bringing price pressures down.
With a 2 per cent decline, NTPC led the pack of losers on the Sensex, followed by Bajaj Finserv, IndusInd Bank, Tata Steel, Reliance Industries, and Sun Pharma.
Asian Paints, HUL, L&T, Axis Bank, and ITC were among the winners on the other hand.
Equity benchmarks have fallen for four straight days after an eight-day bull run, including a record closing streak for six consecutive days.
The indexes had risen to all-time highs due to recent indications of slowing inflation and the decline in crude oil prices, which is advantageous for a significant crude importer like India.
But they have fluctuated over the previous three sessions due to the RBI meeting and solid US data, which dampened hopes that the Federal Reserve will reduce the rate hike cycle.
The global mood for risk assets, too, remained gloomy.
Investors dampened their euphoria about China's reopening as reality chewed into expectations for a softer economic landing in the United States, pausing the rally in world stocks.
Overnight, the S&P 500 fell for a fourth straight session, putting the breaks on an almost two-month-long run. Brent futures are now trading around $79.50 per barrel, returning oil to where it was at the start of the year.
"Some of the optimism that had driven the rally is being put to the test," Shane Oliver, Head of Investment Strategy at Australia's AMP, told Reuters.
"We might be transitioning from a situation of worrying about inflation and interest rates to one where the negatives become weakening growth and falling profits," he added.
As rising rates and inflation threaten consumer demand, big banks in the US are bracing for a weaker economy in 2019. In their Tuesday speeches, senior executives from Goldman Sachs, JP Morgan, and Bank of America all sounded bleak.
"Economic growth is slowing," Goldman Sachs CEO David Solomon told Reuters. "When I talk to our clients, they sound extremely cautious."
In reaction to those fears about growth, longer-dated bonds rose, and the safe-haven dollar was able to reverse some of its previous losses.
Chinese stocks in Hong Kong experienced a late-day meltdown due to investors' perception that the road to reopening would be difficult and the chances for an economic rebound uncertain.
Market investors have been quick to book profits after occasional rallies because there are still questions about how to reopen Asia's largest economy.
Even while senior officials are reportedly debating a growth objective of roughly 5 per cent, there are concerns about an anticipated rise in infections and more economic disruptions in the coming year.
"Though the market is still trading on the positive expectations, we are not entirely out of the woods, as we still have to get past the panic that might come with the first wave of infections," Ma Xuzhen, a Fund Manager at Longquan Investment Management, told Bloomberg.
Weak trade figures, including a greater decline in China's exports and imports in November, exacerbated negative sentiment.
"The uncertainties remain high", especially regarding how disruptive the exit from Covid Zero could be and whether policymakers are willing to leverage up the economy, Macquarie International Services' economists, including Larry Hu, wrote in a research note, according to Bloomberg.
There wasn't much excitement for risky assets in the world of European stocks on Wednesday, with Asian shares trading rangebound after Wall Street stocks again lost ground as markets progressively adjusted for higher interest rate increases.
In the commodities market, Brent crude futures dropped 0.6 per cent to $78.86 per barrel after falling below $80 for the second time in 2022 during the previous trading session. Spot gold was stable at $1,772 per ounce.
In the digital currency market, with sentiment fragile as the effects of the collapse of FTX spread through the industry, Bitcoin lost 1.6 per cent to below $17,000.