Indian equity benchmarks extended losses for the third straight session on Monday as investors eye clues on future US rate hikes and on concern that China may tighten Covid restrictions in response to reported deaths.
The BSE Sensex index fell 468.58 points, or 0.76 per cent, to 61,194.90, and the broader NSE Nifty index declined 135.10 points, or 0.74 per cent, to 18,172.55, reflecting a sea of red in other Asian bourses in early trade.
The Sensex pack's biggest laggards included Bajaj Finance, Mahindra & Mahindra, Bajaj Finserv, ITC, Reliance Industries, Tech Mahindra, HDFC, Infosys, Tata Consultancy Services, and Nestle.
The winners included Axis Bank, Bharti Airtel, Maruti, Hindustan Unilever, and Tata Steel.
"The optimism driven by the recent decline is US inflation has run its course and the market is likely to wait for further data on the direction of US inflation and interest rates," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told PTI.
The benchmark Hang Seng Index fell more than 3 per cent and took the lead in the decline in Asian hours. US futures declined, and the MSCI AC Asia Pacific index fell to a one-week low.Â
China experienced its first Covid-related death in six months on Saturday, and two more were reported on Sunday.Â
Schools have been shut down, universities have been locked down, and citizens have been advised to stay at home for five days in a city close to Beijing that was thought to be a test case for lifting strict restrictions.
Steve Brice, Chief Investment Officer for Wealth Management at Standard Chartered Bank, told Bloomberg that the latest cases of Covid infections and deaths in China present a challenge to the government and dashed hopes of an early easing in stringent restrictions.
"We've seen a very strong rally in China markets in recent times," on the expectations of a relaxation of curbs, Mr Brice said on Bloomberg Radio. "So investors would be very kind of interested to see what the response is going to be."
Beyond Asia, traders will eye the minutes of the latest Fed meeting on Wednesday for hints on the timing and pace of rate hikes.
"Markets are likely to struggle in early Monday trades, tracking weakness in SGX Nifty and other Asian indices. The pessimism can be attributed to the harsh tone by the Fed officials over the weekend," said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.
Raphael Bostic, President of the Atlanta Federal Reserve, said on Saturday that he was prepared to scale back to a half-point increase in rates in December but also emphasised that rates will likely stay elevated for longer than markets anticipated.
"We are comfortable that the deceleration underway in US inflation and European growth produces a moderation in the pace of tightening starting next month," said Bruce Kasman, Head of Research at JPMorgan, told Reuters.
"But for central banks to pause, they also need clear evidence that labour markets are easing," he added. "The latest reports in the US, euro area, and UK point to only a limited moderation in labour demand, while news on wages points to sustained pressures."
Still, a fall in oil prices to near 2-month lows may help domestic stocks.
"There is a bright possibility that the Nifty could zoom higher and march towards its all-time high of 18,605 amid tumbling crude oil price at $80 a barrel after falling nearly 10 per cent last week," said Mehta Equities' Mr Tapse.
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