Indian equity benchmarks dropped to two-month closing lows on Friday tracking a global sell-off triggered by fears of worsening inflation, which has already prompted major central banks to raise pandemic-era interest rates. All sectors were deep in the red on Dalal Street, with financial, IT and auto stocks being the biggest drags on headline indices.

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NSE

Both main gauges recovered some of their intraday losses after plummeting as two percent during the session.

The 30-scrip Sensex index fell 1,115.5 points to hit 54,586.8 at the weakest level of the day, and the broader Nifty50 benchmark slumped to as low as 16,340.9, down 341.8 points from its previous close.

Investors lost Rs 4.5 lakh crore in wealth as the market capitalisation of BSE-listed companies dropped to Rs 255.2 lakh crore compared with the previous day, according to provisional exchange data.

A total of 39 stocks on the Nifty50 finished the day below the flatline.

On the other hand, Hero MotoCorp, Tech Mahindra and PowerGrid were among the gainers.

Broader markets also weakened, with the Nifty Midcap 100 index falling 1.8 percent and its smallcap counterpart 2.5 percent.

Overall market breadth favoured the bears, with an advance-decline ratio of 1:4 as 441 stocks rose and 1,648 fell on NSE.

The India VIX -- known in market parlance as the fear index -- jumped 4.7 percent to end at 21.3.

"We are in for volatility going forward mostly because of global moves and the fact that we have now clear indications that central bank is now giving priority to inflation as the number one enemy," Mihir Vora, Director and CIO at Max Life Insurance, told CNBC-TV18.

"The risk is, which what I think the market is factoring in, that probably the central banks can go too far, and the medicine might be worse than the cure. And that's the fear that the market has at this point in time," he said.

Global markets

European shares began the day with losses following a more than one-year low in world markets, as investors assessed the impact of worsening inflation. The Bank of England raised rates to the highest since 2009. The pan-European Stoxx index was down 1.2 percent in early hours.

MSCI's world equity index hit its lowest since February 2021. S&P 500 futures were down 0.3 percent, suggesting a sluggish start ahead on Wall Street.

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