Sensex Sheds Over 750 Pts.: Here's What Driving Markets Lower

Indian equities amid weak sentiments on the back of uncertainty in the pace of future rate hikes reportedly snapped the longest winning run in 2 years time. The headline indices prior to today's trade rose for eight-straight sessions and in the run-up Sensex reclaimed 60,000 levels. As of writing this copy at around 2:11 pm, Nifty was down by over 1% or 191 points at 17763, while Sensex took a beating by over 1% or 640 points to 59,661. At day's low, Sensex took a knock by over 800 points to 59,474.

Here are the factors that drove indices lower today:

Centre hikes additional excise duty on fuel exports

The excise duty on diesel export has been increased to Rs. 7 per litre while for jet fuel exports it has been hiked to Rs. 2 per litre from nil previously. The additional excise duty on such fuel exports applicable from August 19 weighed on the stock of Reliance Industries. The shares of RIL tumbled by as much as 2% to day's low price of Rs. 2605 per share on the NSE. Brokerage firm sees the move to be negative for the refining sector and iterates that "it will reduce refining gains of exports focused companies, mainly Reliance Industries".

Rate hike pace to be maintained as though

Even though inflation in the US for July month has slowed, members of the Federal Reserve William Dudley and Neil Kashkari on Thursday (August 18, 2022) advocated for a 75 basis point rate hike in September meet. Also, they asserted for the continuity in the current rate hike pace all through 2022.

US dollar strengthens to 1-month high

The US dollar rose to a 1-month high after the Fed policymakers hinted at aggressive rate hike move in the future to curb the red-hot inflation. At the time of writing this copy, the dollar index that tracks the greenback against a basket of six other currencies was up 0.15% to 107.64. Notably, the dollar index had been trading weak over the past two months. But the latest gains have weighed on Indian equities as a stronger dollar fuels capital outflows.

Global markets

Tracking weak global markets, European stock markets traded largely lower today as investors fretted about inflation, tightening monetary policy, and slowing growth. German DAX was down by over 0.8%, French CAC by 0.63% and FTSE by 0.25%.