A wave of risk aversion swept through Asia-Pacific financial markets on Thursday, with most major indices closing sharply lower.
The downturn mirrored a significant sell-off on Wall Street, as investor sentiment soured dramatically amid mounting fears that a new US budget bill could substantially exacerbate the country’s already substantial debt burden.
Indian benchmarks, including the Sensex, were caught in the global downdraft, experiencing a notable decline.
US deficit fears trigger global market retreat
The primary catalyst for the broad-based selling pressure was escalating anxiety over the fiscal trajectory of the United States.
Concerns that a new US budget proposal, which includes tax cuts, could further inflate the federal deficit rattled global investors.
This apprehension was compounded by last week’s debt outlook downgrade by Moody’s, which continued to weigh on market sentiment.
The nervousness was palpable on Wall Street overnight, where the three major averages closed significantly lower.
Stocks sold off, pressured by a sharp spike in Treasury yields as traders grew increasingly worried about the potential strain on the US deficit.
The Dow Jones Industrial Average lost a substantial 816.80 points, or 1.91%, to settle at 41,860.44.
The S&P 500 shed 1.61% to 5,844.61, and the Nasdaq Composite slid 1.41% to 18,872.64.
The 30-year Treasury bond yield touched its highest level since October 2023, last trading around 5.09%, while the benchmark 10-year Treasury note yield traded at 4.59%.
US stock futures were flat in overnight trading on Wednesday following this sizable sell-off, with futures on the Dow Jones Industrial Average dipping 60 points, and S&P 500 and Nasdaq 100 futures showing little change.
Asian bourses mirror Wall Street’s decline
The sell-off on Wall Street had a direct spillover effect on Asian markets.
Japan’s benchmark Nikkei 225 fell 0.84% to close at 36,985.87, while the broader Topix index lost 0.58% to end the day at 2,717.09.
South Korea’s Kospi slipped 1.22% to 2,593.67, and the small-cap Kosdaq declined 0.82% to close at 717.67. Australia’s S&P/ASX 200 also fell, dropping 0.45% to end the trading day at 8,348.7.
In Greater China, Hong Kong’s Hang Seng index slipped 1.19% to close at 23,544.31, while mainland China’s CSI 300 experienced a more modest fall of 0.06% to close at 3,913.87.
Indian markets succumb to global pressure; Sensex tumbles
Indian equity benchmarks mirrored the global rout, tumbling over 1 percent on Thursday.
The BSE Sensex plummeted 644.64 points, or 0.79 percent, to close at 80,951.99. Similarly, the NSE Nifty50 fell 203.75 points, or 0.82 percent, to 24,609.7.
The selling pressure was widespread, with all 13 sectoral indices on the NSE opening in the red.
Broader markets also felt the impact, with the Nifty Midcap100 down 0.6 percent and the Nifty Smallcap100 losing 0.3 percent in early trade.
Several factors contributed to the sharp decline in Indian markets:
- IT stocks drag: The technology sector was particularly hard-hit, as concerns over US fiscal health raised doubts about the business outlook for Indian IT companies, which derive a significant portion of their revenue from the US.
Tech Mahindra dropped over 2 percent to Rs 1,564.70, leading losses in the Nifty IT index. Persistent Systems, HCL Tech, and Mphasis also slipped over 2 percent each.
- Rising India VIX: Investor caution was reflected in a spike in India’s volatility index.
The India VIX jumped 2.8 percent to 18.04 during early trade, though it later cooled slightly to 17.54, indicating heightened market uncertainty.
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