Foreign institutional investors (FIIs) continued their sell-off with Sensex and Nifty falling by 1.72% and 1.70%, respectively. Experts said investors have completely turned their backs on risk after the US Federal Reserve’s latest rate action and declared resolve to fight inflation. Equity exits have also been accelerated by escalating Russia-Ukraine conflict, prompting investors to hedge dollar assets.
Nilesh Shah, managing director of Kotak Asset Management Company, said the market “will remain volatile with a downward bias for now, amid rising escalation between Russia and Ukraine, with terminal FFR (fed funds rate) increasing aggressively. 4.6% is projected next year, and the fact that India trades at a premium of over 65% to EM until recently.”
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FIIs, who have been net sellers of high value equities 3,800 crore in the first four days of the week, the share price sold 2,900 crore on Friday. According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, FIIs are unlikely to be a frequent buy when the US 10-year bond yield is above 3.7% and the dollar index is above 111.
After falling 302.45 points, Nifty has slipped into the red during 2022 (from closing level of 17,354.05 on December 31) at 17,327.35, wiping out all gains for the year. HDFC Securities Head of Research Deepak Jasani said NSE volumes were the lowest since September 12. All sectoral indices ended with losses in realty, power, banks, capital goods and telecom.
Meanwhile, the rupee is expected to remain under pressure, and currency experts said its recent range Looking at the risk-off sentiment after the US Fed meeting, 79-80 may shift upwards.
Suvodip Rakshit, Senior Economist, Kotak Institutional, said, “After the FOMC (Federal Open Market Committee) meeting, a markedly more hawkish Fed strengthened the dollar, and the rupee’s range had to be shifted higher as well, which was decided by the RBI. The intervention has been supported.” Equity.
Rakshit said the rupee may trade in a range of 79-83 for the rest of FY13 due to the strengthening of the dollar, higher-than-normal exposure to current account deficit, and limited room for foreign exchange intervention and RBI may reduce the rupee gradually. To remove external imbalance.
He said some favorable factors could be less crude, and others could be commodity prices and FPI credit flows in the case of the announcement of bond index inclusion.
KN Dey, managing partner, United Financial Consultants, said the RBI may have intervened in the foreign exchange market as the rupee crossed the 81.20 level before closing down 0.15% at a record low of 80.99.
Day said fears of a nuclear conflict over Ukraine and Fed rate hikes had shaken the rupee recently, given the wide gap between CPI inflation and FFR in that market, US interest rates could be hiked further, In which inflation is more than 5%. FFR at 3-3.25%.
In contrast, in India, the spread between CPI inflation and the repo rate was 1.6%, indicating that the RBI may increase the repo by 100 bps to 6.4% by the end of the year.
Kotak’s Shah said that the level of rupee should be market fixed, but the limit of volatility should be fixed by RBI.
He added that only sharp depreciation towards 85 may adversely affect FPI inflows.
Vijayakumar said investors can wait and see before putting in more money, the trend is to select bottom-up stocks.
The US Fed revising growth expectations has shaken investor sentiments, further raising fears of a recession. Brent slipped further to $ 86.67 a barrel on fears of a recession.
“This time, Fed policy comes with a projection of low growth and slowly rising unemployment,” said Joseph Thomas, head of research at Emkay Wealth Management. This disappointed many market participants, who believe it is a confirmation of the US’s gradual entry into a period of declining economic growth, Thomas said.
Jasani said global stocks hit two-year lows on Friday and bonds suffered an eighth weekly loss as investors digested the prospect of a more aggressive hike in US interest rates. Brent slipped further to $ 86.67 a barrel on fears of a recession.
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