Sensex Drops 800 pts, Investors Lose Rs 2.7 Lakh Cr; Why Is Stock Market Falling Today?

Indian stock markets opened sharply lower on Friday as traders await US inflation figures, due later today. On Friday, markets tumbled with the S&P BSE Sensex and Nifty 50 down 1.4 percent each and eroding about Rs 2.7 crore from investor wealth, according to BSE data. At 12 noon, Sensex was trading down 839.65 points or 1.52 percent at 54,480.63, and the Nifty was down 229 points or 1.39 percent at 16,249.1.

Analysts said investor confidence has been intimidating due to persistently high levels of commodity prices, and continued disruption to supply chains around the world to deal a double whammy to the economy and businesses alike. The boost to the US 10-year bond yield to 3.05 per cent can be interpreted as ruling out worse-than-expected inflation data in the US on Friday. If the inflation data turns out to be worse than expected, the stock markets will turn bearish. If not, the markets will rebound next week. “Calibrated buying on dips in high-quality banks and IT stocks could bring good returns for investors in the medium term,” said VK Vijayakumar, Senior Investment Analyst at Geojit Financial Services.

Here are the main factors that drove the markets lower on Friday:

US Consumer Price Index data

Investors are awaiting US CPI inflation data for the month of May today. They expect the US Federal Reserve to raise interest rates by 50 basis points next week, especially if the data confirms rising inflation.

Investors were concerned about a potential slowdown in economic growth in the wake of the Federal Reserve’s monetary policy tightening, said Deepak Jasani, head of retail research, HDFC Securities, with the May CPI report later today.

Crude oil when boiling

The rise in crude oil prices to new highs has hurt India’s import bill, which mainly comprises petroleum products. Despite Friday’s drop, crude oil prices hovered near a three-month high. Brent crude futures for August fell $1.01, or 0.8 percent, to $122.06 a barrel by 0141 GMT, after a 0.4 percent drop the previous day.

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