India’s stock and currency markets took a hit on Friday since traders feared an impending global crisis triggered by the unprecedented interest rate hike scenario introduced by the US Federal Reserve.
The rupee hit 81 per dollar before closing at a lifetime low of 80.99. Sensex and Nifty were down 1.73 percent as foreign portfolio investors (FPIs) and retail investors ramped up the sale. Sensex stock fell 1,020 points to close at 58,098 points. Nifty stock fell 302 points at 17,327. Analysts said that both indicators are close to breaking through key support levels, indicating a further sharp decline.
catch up to do
US Federal Reserve Chairman Jerome Powell has signaled an additional 2.25 per cent increase in key interest rates this year and another 0.25 per cent increase next year. Experts say Indian stock markets will catch up with US markets in the coming weeks. Major US stock indexes are down 18-24 percent so far in 2022, while Sensex and Nifty are down less than 5 percent from their highs.
Rohit Srivastava, chief strategist at Indiacharts, said, “Friday was just the beginning. The markets may see a repeat of the 2001 and 2008 Wall Street crisis. Then, too, Indian markets continued to rally for several weeks even as benchmark indices in the US fell significantly. Sharp. The segregation theory, which has been the cause of the upsurge in Indian markets, works only until the markets catch up with the reality of quicksands, i.e. the vanishing of global liquidity.”
Srivastava says Nifty will test 14,500 levels by December. “The sudden rise in bond yields in India on Friday is a major indication that the Reserve Bank of India (RBI) is far behind in raising interest rates. They will have to be more aggressive and when that happens, Nifty and Sensex will have no ground given that the rupee It will be in a free fall against the dollar.”
According to the Kotak Securities report, USD/INR will trade in the 79-83 range for the rest of FY23 (and average around 80.2 in FY23E), with restricted intervention from RBI FX. Meanwhile, India’s foreign exchange reserves fell $5.219 billion in the week ending September 16 to $545,652 billion. Overall, reserves have shrunk by $61.657 billion since the end of March, in part due to the Reserve Bank of India’s intervention in the forex market to contain volatility in the local currency.
Darashaw CEO Paman Mehta said, “We have repeatedly highlighted in our reports that keeping Nifty above 17116 on a weekly closing basis is important. Failure to do so will result in the completion of the double top pattern which will give targets around 16300. Still a month low. March at 15671 is the main support on the basis of the monthly close.The monthly close below the same level may lead to the continuation of the bearish movement in the medium term. On the other hand, the weekly close above 18114 is important to continue rising since the June low at 15183. However, The sheer clarity that Nifty is going on in a secular movement and that the decline is significantly in place will only happen with a quarterly close above the October 2021 high of 18604. Without a quarterly close above 18604, Nifty will be open to downside in the medium term “.
FPIs sell shares
FPIs sold shares worth Rs 2,900 crore in the cash portion. They sold index futures worth Rs.3,372 crore and stock futures worth Rs2,990 crore on Friday, according to exchange data. The data showed that retail investors were net sellers of Rs.255 crore in the cash segment. After dropping more than 1.5 percent on Thursday, US indexes fell 1.4-1.6 percent on Friday. India’s benchmark bond yields jumped to 7.39 per cent from 7.23 per cent in just one day.
September 23, 2022