The Sensex ended 709.17 points or 1.26% down at 55,776.85 and the Nifty dropped 208.30 points or 1.23% to 16,663. The five-day rise, during which indices gained 6-7%, was the longest stretch of gains in two months. The fall in oil and metal prices on account of renewed Covid fears in China pulled down the shares of oil and gas and steel companies.
Foreign Portfolio Investors sold Indian shares worth ₹1,249.74 crore on Tuesday and Domestic Institutional Investors bought shares amounting to ₹98.25 crore, data on the NSE showed.
“So far the trend in China has been that it clamps down in particular areas where cases pick up and restricts a lot of activity. If this becomes more widespread, it could have an impact on global supply chains, which is not good from an inflation perspective,” said Sanjeev Prasad, co-head, Kotak Institutional Equities. China is a big supplier of manufactured products – both intermediate and final.
Tata Steel was the biggest casualty on the Sensex, ending down nearly 5%, followed by Kotak Mahindra Bank, Tech Mahindra, Infosys, Reliance Industries and HCL Technologies, which fell 2-3% o n Tuesday.
Most Asian markets ended down, led by the Shanghai Composite, which lost 5% and the Hang Seng index dropped 5.7% as lockdowns due to surging cases threatened to disrupt the economy despite data showing strong retail sales and industrial production figures in China.
Concern about regulatory crackdowns by the US and China on the tech sector has led to a slump in tech stocks in Hong Kong.
“Post the second and third wave, while China has seen some rise in cases, it is doubtful that it is going to be seen as a big issue across other parts of the world. Ukraine is a bigger uncertainty compared to the Covid issue,” said A Balasubramanian, CEO at Aditya Birla Sun Life Mutual Fund.
Global market sentiment in the last three weeks has been roiled by the Ukraine conflict, and this was preceded by concern over aggressive rate hikes by the US Fed. Some brokerages have even downgraded weight on Indian equities due to the surge in oil prices triggered by this geopolitical worry.
Investors will watch out for the Fed meeting outcome for clues on the pace of tightening after March.
“While some Fed officials advocated or at least considered a 50 basis point hike at the March meeting, the war in Ukraine seems to have created enough uncertainty to take that option off the table for now,” said Goldman Sachs.
