Sensex opens over 700 points lower, why are markets in the red?

As inflation rose to 8.3 per cent in August despite declining gasoline prices, concerns rose in the market over a further rate hike by the Federal Reserve next week. Market experts believe the Fed could raise the rates by another 75 basis points next week which in turn could hurt global growth.

In fact, Fed officials have maintained in the past that they will continue with the pace of rate hikes until there is evidence that core inflation pressure is easing.

The limited fall in India

Even as the US markets fell sharply by 3.9 per cent and Nikkei in Japan fell by over 2 per cent on Wednesday, the fall in benchmark Indian indices was limited to around 1 per cent at the market opening on Wednesday.

Earlier this week, data released in India showed a rise in CPI inflation to 7 per cent. It, however, had no impact on Indian markets as they have been drawing comfort from the decline in global crude oil prices. Experts say that if the oil prices continue to remain at lower levels, Indian markets will remain stable as crude price is a big factor for Indian economy and markets since India imports nearly 85 per cent of its oil requirements.

The Hang Seng in Hong Kong and Shanghai Composite in China were down 2.5 per cent and 1.1 per cent, respectively.

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