Indian equity benchmarks turned negative for 2022 on Friday thanks to a market-wide sell-off as the rupee nosedived to a lifetime low against the US dollar. The Fed's third back-to-back hike of 75 basis points in the key US interest rate — though along expected lines — and its commitment to battling inflation sent shockwaves across global markets, denting the sentiment on Dalal Street.

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Both headline indices plunged as much as 1.9 percent before settling close to their intraday lows — falling for a third straight day. The Sensex shed 1,137.8 points to 57,982 at the weakest level of the day, giving up its entire gain for the year. The Nifty50 slumped to as low as 17,291.7 before settling down 26.7 points for 2022.

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What's pulling the market lower?

Analysts count fears of a global slowdown, a fall in the rupee below an unprecedented 81 mark against the US dollar, a slowing pace of foreign fund inflows, frothy valuations, multi-year high levels of inflation, and geopolitical tensions as key factors behind the market fall.

“Today’s fall has more to do with the weakening rupee, which impacts banking and financial services… Even on a trailing 12-months (TTM) basis, we are barely positive (0.2 percent). The entire BFSI pack has been an outperformer in the recent past and that is where the problem lies,” AK Prabhakar, Head of Research at IDBI Capital, told CNBCTV18.com.

The rupee briefly traded below the 81 mark against the greenback during Friday's session.

“Normally when the rupee is weak, financials correct… The same negativity can also be seen in oil marketing companies,” he added.

On Wednesday, the Fed announced a widely-expected rate hike and reiterated its commitment to keep up increases into 2023 to fight red-hot inflation.

Fed Chair Jerome Powell has vowed to "keep at" the US central bank's battle to beat down inflation and said there is no painless way to bring down inflation.

Though the Indian market recovered about half of its intraday losses in a volatile session the next day, it continued to fall on Friday dragged by weakness across most sectors.

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First Published:Sept 23, 2022 1:38 PM IST