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Sensex Drops Near 400 Points As Global Markets See Carnage

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Benchmark indices fell in trade, as fears of a global recession gathered momentum. The Sensex dropped below the 38,000 points mark, while the Nifty fell below the 11,400 points mark.

The Sensex was down 390 points, while the Nifty shed 118 points in early trade.

On Friday, the inverted yield curve on US treasuries turned negative. This actually happens when the spread between the 3-month treasury bill and the 10-year one, turns negative. It is the first time since 2007 this has happened.

Sensex Drops Near 400 Points As Global Markets See Carnage
 

This inversion happens when the short term rates, move ahead of the long term rates. It is generally perceived as a sign of weakness and an indication that we maybe heading for a recession.

In the past, when the yield has turned negative a recession has almost always followed in a year's time.

Heavyweights from the Nifty, including the likes of Reliance, ITC and TCS were trading lower. Banking stocks, which have so far been on a roll, also dropped in trade. ICICI Bank, State Bank of India and IndusInd Bank were down 1-2 per cent.

Metal stocks were the worst hit in trade on worries of a global slowdown. Vedanta and Hindalco were down more than 3 per cent each.

In Asia, markets were seeing deep corrections. The Japanese Nikkei was down more than 3 per cent, while the Hang Sang also fell 2 per cent. On Friday, both European and Asian markets had closed sharply lower.

GoodReturns.in

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