Home Business News of China Covid fatalities spook indices; Sensex, Nifty drop 0.8%

News of China Covid fatalities spook indices; Sensex, Nifty drop 0.8%

The benchmark indices declined on Monday as investors fled risky assets amidst worries that China may reimpose Covid restrictions, further straining global growth. The ended the session at 61,145 — a decline of 518 points, or 0.8 per cent. ended the session at 18,160 — a decline of 147 points, or 0.8 per cent.

Last week, the had recorded new highs, while the was less than half a per cent shy of a new high. Currently, both indices are less than 2 per cent below their all-time closing highs.

“Negative newsflow has triggered some profit-taking. Indian have had a good run and there is global fatigue,” said Andrew Holland, chief executive officer, Avendus Capital Alternate Strategies.

China reported its first Covid death on Saturday after six months and another two casualties on Sunday, said reports. The Covid situation in China is making investors skittish.

Analysts said the recent outbreak has raised worries that the Chinese authorities might invoke harsher conditions to contain the spread. The strict lockdown in China and slowdown in its real estate market have compounded global economic woes, along with interest rate hikes and geopolitical tensions in Europe.

Index heavyweight Reliance Industries fell 1.8 per cent (accounting for over 40 per cent) amid decline in global oil prices. Information technology majors Infosys and Tata Consultancy Services fell over 1.6 per cent apiece and pulled the index down further.

On Monday, foreign portfolio investors (FPIs) dumped shares worth nearly Rs 1,600 crore, while their domestic counterparts provided buying support of nearly Rs 1,300 crore.

Experts said the FPI flow outlook hinges on the minutes of the US Federal Reserve (Fed) meeting and statements of its officials to gauge the course of rate hikes.

Last week, Federal Reserve of Atlanta President Raphael Bostic said he preferred slowing the pace of hikes. Bostic said he favoured another 1 percentage point hike and this level would be sufficient to keep inflation in check over a reasonable period of time.

Meanwhile, Fed’s Boston President Susan Collins last week argued that more hikes might be needed to keep inflation in check, and reiterated that her views on rate hikes remain unchanged, notwithstanding the recent economic reports.

The US central bank had raised interest rates by 75 basis points (bps) for the fourth consecutive time earlier this month. Monetary policymakers have signalled they may hike another 50 bps by mid-December depending on the economic data.

Oil prices dropped amidst concern about weakening demand.

“The sharp decline in crude oil prices is a huge positive for the domestic economy. However, the market did not respond favourably due to stronger headwinds from the global market. The prospect of China’s Covid restrictions affected the world market,” said Vinod Nair, head of research, Geojit Financial Services.

However, some experts felt that the latest decline in the market is standard profit-taking after the recent surge. From October lows, the benchmark has rallied as much as 8 per cent.

“While we’re seeing a mixed trend across sectors, resilience in the banking space is playing a critical role in capping the damage so far. We recommend continuing with a stock-specific trading approach and maintaining positions on both sides,” said Ajit Mishra, vice-president-research, Religare Broking.

The market breadth was weak, with 2,172 stocks declining, against 1,424 advancing.

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