Market cues point to further pain for India’s assets: Key highlights


Investors’ gloomy mood and risks remain for Indian stocks and rupee

Indian equities and the rupee are facing further pain after a broad and deep recession since the war on the fringes of Europe as stagflation, believed to be a result of the Russia-Ukraine crisis, is increasingly becoming a baseline scenario.

Key highlights and factors to watch out for:

  1. Domestic equity benchmarks have taken a beating tracking broader global stock markets, which in late February saw fears about Russia attacking Ukraine, lockdowns in China and higher interest rates rattled financial markets. The blow has been sent.

  2. Global trends, April wholesale price-based inflation data and current quarter earnings of corporates will be key driving factors for the stock markets. The Indian stock market fell more than 2 per cent in April and has closed most days in May so far. The Sensex was down 2,041.96 points or 3.72 per cent for the week ended May 13 on concerns of stagflation and capital outflow over flight-to-safety trades.

  3. Foreign investors continued selling Indian shares as they pulled out over Rs 25,200 crore from the Indian equity market in the first fortnight of this month, on concerns over interest rate hike and rising COVID cases globally.

  4. “On the domestic front, the listing of LIC IPO will be a significant sentiment trigger for the Indian equity market. FIIs are selling continuously while DIIs are trying to offset their selloff, hence, their behavior will also play an important role in the market. The movement of dollar index, crude oil prices and the direction of rupee will be other important factors,” Santosh Meena, head of research at Swastik Investments told PTI.

  5. “Inflation concerns and monetary tightness across the globe are major concerns for equity markets. Equity markets are in a strong bear grip; however, they look highly oversold and are due for a pullback rally. Selling in US markets, particularly In technical stocks, it was very grim, and there is some stability in the last two trading sessions which may provide some relief to the bulls,” said Santosh Meena.

  6. The latest Indian data for April showed rising inflation, and with international developments not very attractive, broader investor sentiment points to further downside. The expected interest rate differential dynamic and flight-to-safety trades point to a gloomy mood, despite RBI raising rates.

  7. “Against a backdrop of declining Chinese and European activity, new plans for Russian energy sanctions and supply-side pressures came a series of hawkish communications,” Barclays analysts warned. “This creates the bleak prospect of persistent inflation forcing central banks to raise rates despite increasingly slow growth.”

  8. International crude oil prices rose sharply for the third month and traded above $100 on an average due to supply disruptions from the Russo-Ukraine war, weighing on the Indian currency.

  9. The rupee repeatedly hit fresh record lows last week. In fact, on Monday, May 9, the rupee had closed at a record low of 77.44 against the dollar at that time. It breached 77.50 per dollar at different times and repeatedly breached its lifetime intra-day lows. The currency ended at a new all-time low of 77.50 after hitting a fresh intra-day low of 77.63 against the US dollar on Thursday.

  10. The fallout of the Ukraine war on Indian assets was also reflected in the ninth straight week of India’s forex reserves falling to a one-year low of $595.954 billion, eroding the country’s FX war chest accumulation in just two months as RBI . Forced to increase Rs. This is for a week when the rupee fell to its all-time low, indicating further downside.

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