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Investors fear intensified flamboyant The US Fed at its rate-setting meeting on June 15 vowed to raise dollar and bond yields, to control inflation (at 40-year high). Analysts say a possible selloff may test the long support near 15,800 level nifty This week.
On Friday, the Indian stock Nifty closed at 16,200, while the rupee closed at a record low ahead of the release of US inflation data on concerns about a rise in oil prices. US consumer prices rose 8.6% in May – the highest rate since 1981, prompting investors to fear inflation is more sticky than anticipated and the Fed may have to increase rates more aggressively It can slow or even push growth in the largest economy. in recession. The Dow Jones Industrial Average fell 2.7%, the S&P 500 dropped 2.9%, and the Nasdaq fell 3.5%.
“Persistent, energy price-fueled inflation pressures are clouding the outlook for a soft landing,” Christian Keller, Barclays’ global head – economics research, said in a note to clients. “As central banks’ normalization efforts catch up with deteriorating expectations, financial conditions continue to harden, suggesting that real economic variables may worsen further in the coming months.”
Barclays expects the Fed to increase interest rates by 75 basis points on June 15.
Rapid rate hikes by developed markets, amid a flight towards safe-haven assets like the dollar, will further reduce appetite for riskier emerging markets, including India.
“When the dollar index crosses 104 and US bond yields are rising, there is bound to be restlessness in the market,” said Siddharth Bhamre, Head-Research, Securities.
Nifty may soon cross 15,800 but I don’t see any major accident happening. The index will continue to swing in a band.” Nifty has fallen 6.6% so far in 2022.
A firming dollar and rising oil prices have already prompted foreign investors to withdraw money from Indian equities at a record pace as a weak rupee reduces the value of their holdings in the country.
Foreign portfolio investors (FPIs) were net sellers at Rs 3,973.95 crore on Friday, taking the sales so far for June to Rs 18,900 crore.
In May, he pulled out Rs 37,664 crore from shares and since January his total outflow from domestic equity is Rs 1.82 lakh crore.
“May’s soft patch for both short-term US interest rates and the dollar is fading fast in the past and a bullish FOMC meeting should support the dollar at higher levels,” said James Knightley, ING’s chief international economist. “Higher US real rates will create headwinds for emerging market currencies – even with a withdrawal from commodity exports.”
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