India's benchmark equity indices opened more than 1.5 per cent lower on Friday morning, after another slump in the US markets triggered a sell-off globally.
The BSE Sensex was down 516 points at 33,896.79 and the wider NSE Nifty 50 traded 170 points lower at 10,407.15.
Across Asia, markets were trading sharply lower; Shanghai Composite Index tumbled 5.6 per cent, Korea's Kospi and Singapore's Straits Times Index fell 2 per cent, Japan's Nikkei declined over 3 per cent and Hong Kong's Hang Seng sank over 4 per cent.
Overnight, US markets crashed 4 per cent; the Dow Jones Industrial Average fell 1,032 points, the second time this week that it has fallen more than 1,000 points, in a volatile session.
The correction had begun last Friday after a strong US jobs data raised inflationary concerns and worries that the US Federal Reserve would raise interest rates faster.
Furthermore, the yields on US benchmark 10-year treasury note hit a four-high high of 2.885 per cent on Monday and touched 2.884 per cent on Thursday. The higher yields may drive some money from stocks, which were anyway trading at record valuations, to bonds, putting pressure on equities.
“Record-low jobless rate and high capacity utilisation in the US economy has sparked worries about wages-led inflationary pressures forcing the Fed to slam the brakes by rapidly increasing interest rates,” said Ajay Bodke, CEO and chief portfolio manager at brokerage Prabhudas Lilladher.
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Elsewhere, the Bank of England has also hinted that the pace of interest rates hikes may have to be increased if the economic growth remained on track, which will put further pressure and drive funds away from emerging market equities.
Analysts point out that global central banks had bought around $16 trillion of bonds to stabilise financial markets following the 2008 financial crisis, which they have now started to unwind.
“As an equity investor, I think it is time to be extremely vigilant,” added Bodke.
Except Tata Steel, which rose 1 per cent, all other components in the 30-share Sensex were trading sharply lower. Financials were the major losers, with ICICI Bank, Axis Bank, HDFC, Kotak Mahindra Bank and Yes Bank, all trading down 1.50-2.50 per cent down.
Among other major losers, ITC declined near 2 per cent, Larsen & Toubro was down 1.6 per cent and tech stocks including Tata Consultancy Services and Infosys were trading more than 1 per cent lower.