Inflation woes! Rate sensitive indices slump 5%; 18 stocks hit 52-week lows

Shares of interest rate sensitive sectors were under severe pressure on Monday, with financials including banks, non banking finance companies (NBFCs), housing finance companies (HFCs), automobiles and real estate sector stocks down up to 6 per cent on the National Stock Exchange (NSE) in intra-day trade on concerns of reversal in interest cycle due to rising inflation.

Nifty Auto, Nifty Realty, Nifty Bank, Nifty Private Bank, Nifty PSU Bank and Nifty Financial Services indices were down in the range of 4 per cent to 5 per cent on the NSE. In comparison, the Nifty50 index was down 2.75 per cent at 09:38 am. Total 18 stocks from these indices hit their respective 52-week lows.

Ashok Leyland, Maruti Suzuki India, Eicher Motors and Mahindra & Mahindra (M&M) from automobiles; Prestige Estates, Sobha and Macrotech Developers from real estate; Bajaj Finance, ICICI Bank, Mahindra & Mahindra Financial Services and Shriram Transport Finance from the financials were down between 5 per cent and 6 per cent.

The Russia-Ukraine conflict has resulted in a global risk-off, with equity markets undergoing intermittent bouts of correction and elevated volatility. The uncertainty over the duration and magnitude of the extant conflict could keep the market jittery and dependent on news flow.

Higher crude oil prices, if sustained for an elevated duration, can result in higher inflation, current account deficit, bond yields, and interest rates in India and thus impact macro-economic stability.

From India’s viewpoint, a sharp spike in crude oil prices (Brent crossed USD100/ barrel before retreating) poses key risks on the external balance front and can play spoilsport with the assumptions made in the FY23 Union Budget, Motilal Oswal Financial Services said in recent report.

If the Russia-Ukraine conflict elongates and leads to elevated energy prices for longer, it may impact earnings estimates. However, close to two-third of Nifty earnings are insulated/benefits from elevated energy prices (IT, BFSI, Metals, Oil & Gas), while one-third is adversely impacted (Consumer, Auto, Cement, Pharma, and Telecom), the brokerage firm said.

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