Risk-aversion hammers down market indices

Mumbai: Benchmark BSE Sensex declined nearly 338 points to close below the 58,000 level on Tuesday, marking its fourth straight day of losses as auto, IT and financial stocks wilted amid concerns over interest rate hikes and the fallout of failure of two US-based banks. The 30-share BSE Sensex fell 337.66 points or 0.58 per cent to settle at a new five month low of 57,900.19. During the session, it touched a high of 58,490.98 and a low of 57,721.16. The broader NSE Nifty declined 111 points or 0.65 per cent to end at a five-month low of 17,043.30, with 38 of its scrips ending in the red. Sensex tumbled 2,447 points or 4.1 per cent while Nifty tanked 711 points or 4.6 per cent in the four days to Tuesday.

Analysts said relentless foreign capital outflows, investors junking riskier assets ahead of the US Fed policy decision and fears of interest rate hikes to stifle global economic recovery have hit the market sentiment. "The selling continued while the degree of ambiguity over the US Banks reduced due to supportive measures announced by the US FED. The underlying issue of the market is high-interest rates, which will continue to wreak havoc in the world economy. Yields will take time to moderate to the long-term trend given the hawkish monetary policy & high inflation," said Vinod Nair, head (research) at Geojit Financial Services.

"However, the disruptive development in the US Banks and a slowing economy have created a precursor to presume that yields will peak in the near future, supported by a change in monetary policy from hawkish to neutral, which will diminish the worries of long-term investors," Nair said. "Asia-Pacific markets tumbled and European markets were mixed on Tuesday, after sharp losses seen overnight on Wall Street as investors grappled with the fallout of failed banks in the US and an uncertain path forward for monetary policy.