Sensex Falls Over 80 Points, Extending Losses For Second Straight Day

Indian equity benchmarks extended losses for the second straight day, albeit falling only slightly in a volatile trading session on Friday, as investors were on edge after US Federal Reserve officials continued with their hawkish stance on future rate hikes.

The BSE Sensex index fell 87.12 points, or 0.14 per cent, to close at 61,663.48, and the broader NSE Nifty index declines 36.25 points, or 0.2 per cent, to end at 18,307.65, tracking a fall in Wall Street stocks overnight.

A day after markets were pushed lower by hawkish remarks from St. Louis Fed President James Bullard, who indicated that interest rates needed to rise at least to 5-5.25 per cent to contain inflation, US index futures fluctuated between losses and gains.

“The fact of inflation having peaked is not a reason for the Fed to turn and cut rates,” Paul Christopher, Head of Global Market Strategy at Wells Fargo Investment Institute, said on Bloomberg Radio. “That's the fundamental disconnect that still exists between the Fed and the market.”

The MSCI World Index stabilised to reduced its weekly loss to 1 per cent.

"The message is about the desire from the Fed to lean against what they would consider premature loosening of financial conditions," Brian Daingerfield, an Analyst at NatWest Markets, told Reuters. "And on that front, message received.

"The Fed seems squarely focused on over-signalling on the tightening front and hoping the data slow to a point where they can have the flexibility to undershoot," he added.

With a crucial portion of the Treasury yield curve at its steepest inversion in four decades - traditionally, such an inversion has signalled recession in the largest economy in the world - concerns are also growing that steadily rising rates may harm economic growth.

Ellen Hazen, Chief Market Strategist at FL Putnam Investment Management, said that if the Fed kept increasing rates at the current pace, “by the time they get the information that they've been successful in slowing the economy and slowing inflation, it might be too late.”

“It's just too soon to know exactly how this is going to play through the economy and that's the biggest risk,” she told Bloomberg Television.