Inflation worries: Rate sensitive sectors drag domestic equities on Monday; know how analyst views this

Selling pressure weighed heavily on the domestic equities on Monday with BSE Sensex and Nifty50 witnessing sharp corrections ever since the markets resumed trading today after the Friday closing.

Around 1 pm, the 30-share Sensex was trading at 53,103.56, down by 1230.25 or 2.26 per cent. Meanwhile, the broader market Nifty50 was trading at 15,924.40, down almost 2 per cent or over 300 points.

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The decline could be attributed to sectors which are directly related to inflation and consequently to interest rates, feel experts. From banking and financial services stocks to automobiles and real estate, pressure was seen in scrips that are directly related it interest rate movement.

Among top Nifty indices, Nifty Auto, Nifty Realty, Nifty Bank, Nifty Private Bank, Nifty PSU Bank and Nifty Financial Services indices were down 4 per cent on the NSE. As many as 18 stocks from these sectoral indices have touched their respective 52-week lows.

In the overall market, the stocks of these sectors were down up to 6 per cent on the intraday basis as concerns of reversal in low interest rate regime loom. 

The Russia-Ukraine conflict has thrown a spanner on the global economic recovery, raising fears of high inflation situation on the back of escalating commodity prices.  

The rising input cost has created massive selling pressure during Monday’s session. The extreme drag in the market is mainly led by rising commodity prices, including crude due to Russia and Ukraine crisis. 

 Auto stocks such as Maruti Suzuki India, Eicher Motors and Mahindra & Mahindra (M&M), Ashok Leyland were down up to 5 per cent. Meanwhile, realty stocks including Prestige Estates, Sobha and Macrotech Developers from real estate; Bajaj Finance, ICICI Bank, M&M Financial Services and Shriram Transport Finance were down up to 6 per cent intraday.

The geopolitical tensions between Russia-Ukraine have impacted overall global sentiment, with equity markets witnessing intermittent corrections across globe. The likely lower exports of Russian crude oil will keep crude oil prices elevated for a protracted period, the brokerage said.

Brokerage firm Kotak Institutional Equities sees meaningful upside risks to inflation and downside risks to corporate profits through increased pressure on margins and volumes both.