The Indian stock market had a rocky start to the day today, Wednesday, September 14, 2022. The market opened deep in the red with the Sensex starting 1153.96 points down from yesterday’s closing of 60,571.08 at 59417.12, before rallying to stand at 60616.02  as of 2:45 pm today. 

The market saw about 1,667 shares drop, 475 gains, and 78 remained unchanged. All the sectors have been trading in the red with the BSE midcap and smallcap indices both down over a percent. 

Let’s look at the circumstances that are likely to have triggered this dip. 

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Soaring US inflation 

Even though inflation in the US declined to 8.3% in August from 8.5% in July, this is still way above the Federal Reserve’s 2% target. Rising costs for rent and healthcare have led to the unexpected shooting up of US consumer prices, thus accelerating inflation, and this has pushed the Federal Reserve to hike interest rates by 75 basis points again next Wednesday.

“The worse-than-expected CPI inflation data in the US, despite cooling gas prices, was a surprise. Now the market fears that inflation is getting entrenched and an ultra-hawkish Fed might trigger a hard landing for the US economy,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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Bearish global markets

With inflation in the US struggling to get tamed as confirmed by Tuesday’s CPI report, any hopes in the market that the Fed might ease up on the pace of its interest rate hikes were dashed. The Dow Jones Industrial Average dipped 1,276.37 points (3.94%) to 31,104.97, the S&P 500 fell by 177.72 points (4.32%) to 3,932.69 and the Nasdaq Composite dropped 632.84 points (5.16%) to 11,633.57. 

The Asian markets have followed suit with Nikkei and Hang Seng down over 2 percent each, while Kospi and Shanghai shedding 1 percent.

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Creeping oil prices

The Organisation of the Petroleum Exporting Countries (OPEC), on Tuesday, stuck to its forecasts of global oil demand in 2022 which had said that oil demand will increase by 3.1 million barrels per day in 2022. Despite headwinds such as a surging inflation, the OPEC cited that major economies were faring better than expected and so its forecasts have remained unchanged. 

“Oil demand in 2023 is expected to be supported by a still-solid economic performance in major consuming countries, as well as potential improvements in COVID-19 restrictions and reduced geopolitical uncertainties,” said OPEC in the report. 

This has seen the price of oil continue to inch higher in early trades on Wednesday.