Extending previous session's southward journey, Indian equity benchmarks ended with losses of over a percent, with frontline gauges breaching their crucial 58,800 (Sensex) and 17,500 (Nifty) levels, dragged by heavy selling pressure in metal, realty and basic materials stocks. Benchmarks made negative start and remained under pressure throughout the session amid weak global cues. Traders remained anxious as the Reserve Bank of India (RBI) data showed that the country's foreign exchange reserves fell $2.238 billion to $570.74 billion in the week ended August 12. Domestic sentiments also got hit with labour ministry stated that retail inflation for farm and rural workers increased to 6.60 per cent and 6.82 per cent, respectively, in July mainly due to higher prices of certain food items. In June retail inflation for farm and rural workers stood at 6.43 per cent and 6.76 per cent respectively. Domestic sentiments remained pessimistic in late afternoon deals, amid reports that with the price situation remaining at 'unacceptably and uncomfortably' high level, members of the RBI's Monetary Policy Committee underlined the need for preventing upward drift of inflation and bringing it down to the target band, as per minutes of its recent policy meeting. Traders also reacted negatively to External Affairs Minister S Jaishankar's statement that India faces a challenge to ensure that its economic interests are well protected and its consumers are shielded to the extent possible from the enormous jump in the oil prices in the wake of the Ukraine conflict. Traders overlooked the finance ministry's monthly economic review stating that India is better placed on the growth-inflation-external balance triangle for 2022-23 than it was two months ago, on the back of government policy response and the RBI's monetary policy actions. Meanwhile, foreign investors have shown tremendous enthusiasm for Indian equities and have infused close to Rs 44,500 crore in August so far amid softening of inflation in US and falling dollar index. Finally, the BSE Sensex fell 872.28 points or 1.46% to 58,773.87 and the CNX Nifty was down by 267.75 points or 1.51% to 17,490.70.

The US markets ended deeply in red with Nasdaq settling cut of over two percent, magnifying their previous session' losses, amid on concerns about the outlook for interest rates.  Traders looked ahead to the economic symposium in Jackson Hole, Wyoming this week. Focus is on Fed Chair Jerome Powell's speech on Friday at the central banking conference in Jackson Hole for further cues on how aggressively the Fed is likely to be with future interest rate hikes. There is expectation that Powell is going to try to sound hawkish to tamp down inflationary expectations and tighten financial conditions. So that's most likely going to be a negative catalyst for the market. Shares from across several sectors reeled under severe selling pressure. Tech stocks declined on concerns over more aggressive rate hikes from the Fed. Financial, airline and energy stocks were among the other prominent losers. Stock specific developments Netflix shares plunged more than 6 percent after CFRA downgraded the stock's rating, citing concerns about a likely drop in company's earnings in the second half of the current financial year. Microsoft, Meta Platforms, Alphabet, Intel, Apple, IBM and Cisco Systems declined sharply. Ford shares plunged after the company said it will lay off 3,000 workers to fund its shift to electric vehicles. Visa, Goldman Sachs, American Express, Home Depot, 3M, Caterpillar, JP Morgan Chase and Caterpillar also ended with sharp losses.

Crude oil futures ended lower on Monday on account of worries about outlook for energy demand. Oil prices also fell as the dollar moved higher against most of its major rivals amid rising bets over interest rate hikes by the Federal Reserve, after another Fed official flagged the likelihood of continued aggressive monetary tightening. Richmond Fed President Thomas Barkin said central bankers were inclined towards faster, front-loaded interest rate increases, even if that meant risking a US economic recession. Benchmark crude oil futures for September delivery fell $0.54 or about 0.6 percent to settle at $90.23 a barrel on the New York Mercantile Exchange. Brent crude for October delivery drooped $0.24 or 0.3 percent to settle at $96.48 a barrel on London's Intercontinental Exchange.   

Indian rupee ended flat on Monday due to mild dollar demand from banks and importers. Traders were anxious as India's foreign exchange reserves slumped by over $2 billion in the week ending August 12, as the Reserve Bank of India intervened to shore up the rupee and keep the currency below 80 per dollar. The RBI's weekly statistical supplement data showed that the country's forex reserves slumped to $570.74 billion in the week ending August 12, down by $2.238 billion from $572.978 billion in the previous week. On the global front, euro briefly fell back below parity against a robust dollar on Monday and was languishing at five-week lows, weighed down by concern that a three-day halt to European gas supplies later this month will exacerbate an energy crisis. Finally, the rupee ended unchanged from its previous close of 79.84 on Friday.

The FIIs as per Monday's data were net buyers in both equity and debt segment. In equity segment, the gross buying was of Rs 7008.56 crore against gross selling of Rs 5476.56 crore, while in the debt segment, the gross purchase was of Rs 211.61 crore against gross selling of Rs 206.32 crore. Besides, in the hybrid segment, the gross buying was of Rs 26.79 crore against gross selling of Rs 3.52 crore.

The US markets ended lower on Monday as nervousness persisted about a Fed gathering this week in Jackson Hole where policymakers are expected to reinforce a strong commitment to stamp out inflation. Asian markets are trading in red on Tuesday following a sell-off on Wall Street overnight. Indian markets suffered their worst fall in more than two months on Monday amid weakness across global markets, as investors remained on the back foot amid fears of a global slowdown. Today, domestic markets are likely to make negative start tracking free-fall in global markets. There will be some volatility in the markets ahead of the monthly expiry of futures and options contracts this week. Traders will be concerned as although private-sector capital expenditure (capex) is expected to lift off in the quarters ahead, a recent study by the Reserve Bank of India (RBI) shows project loan demand by Indian companies for capex in 2021-22 (FY22) did not pick up like it did in the preceding years. There will be some cautiousness as on August 22, foreign institutional investors sold Rs 453.77 crore in the Indian markets. Traders may take note of a private report that the Reserve Bank's rate setting panel is likely to opt for slowing down the pace of hikes and increase the repo rate by 0.25 per cent in September. However, some support may come later in the day as in a bid to promote ease of doing business, the finance ministry notified the consolidated rules for overseas investment by Indian entities. The Foreign Exchange Management (Overseas Investment) Rules, 2022 will subsume extant regulations pertaining to Overseas Investments and Acquisition and Transfer of Immovable Property outside India Regulations, 2015. Meanwhile, a private report stated that the Centre may release about Rs 30,000 crore soon as GST (goods and services tax) compensation for June 2022, the last month of the five-year guaranteed compensation pledged by the Union government. Auto components industry stocks will be in focus as industry body ACMA said Indian auto components industry clocked its highest-ever turnover of Rs 4.2 trillion in 2021-22, registering a growth of 23 per cent on the back of strong performance in exports and aftermarket. There will be some reaction in diamond related industry stocks with a private report that India, which cuts or polishes about 90% of the diamonds sold in the world, is ramping up sales of laboratory-made gems as demand from the US surges and they become more accepted in other markets.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• L&T has commissioned Green Hydrogen plant at its AM Naik Heavy Engineering Complex in Hazira, Gujarat.
• NTPC has started capturing carbon dioxide from the flue gas stream at its thermal plant in Vindhyachal.
• HDFC Bank has launched its state-of-the art Bank on Wheels van, to take banking services to unbanked villages. 
• Cipla's New Jersey-based unit -- Cipla USA, Inc is recalling 7,992 bottles of Difluprednate Ophthalmic Emulsion, used to treat swelling and pain after eye surgery, in the US market.