The central bank has been intervening in the foreign exchange market by buying dollars, and this is capping the rupee's gains.
May touch 64/$ due to foreign flows slowing down
Indian benchmark indices may witness bouts of volatility this week as traders roll over positions in the derivative segment on expiry of near-month contracts, say experts.
'In 2022, active management, long-short strategies, multi-asset strategies, and asset allocation strategies need to be considered to meet long-term investment goals.'
Weakness in Infosys, L&T and Hindalco cap index gains.
The automobile segment is our preferred area, and old favourites such as Tata Motors, Bajaj and Maruti Suzuki continue to entice us.
The sharp rally in the midcap stocks has made valuations expensive, and there is room for a correction, wrote Christopher Wood, global head of equity strategy at Jefferies in his latest note to investors, GREED & fear. The midcap index, Wood said, now trades at 24.1x 12-month forward earnings compared with 18.7x for the Nifty. Rising crude oil prices, he believes, are another worry for India, which imports nearly 80 per cent of its annual crude oil requirement.
The benchmark Nifty rallied 1,000 points or 17% from 7,000 in 78 trading sessions since May 12, till date to surpass the 8,000 mark.
'There is no change in the overall story of economic recovery.'
It can be noted that the rupee lost nearly 7 per cent since the beginning of May as FIIs have pulled out nearly $4 billion from the domestic debt, as bond yields fell on expectation of RBI cutting rates on Monday.
Rupee, bonds may see knee-jerk reaction, as Urjit Patel is considered an inflation warrior
Thus far in 2017-18, FIIs and MFs have invested Rs 198.91 billion and Rs 1,119.49 billion in the Indian equity markets. Of this, around Rs 152.46 billion has come in January alone.
'Earlier-than-expected tapering from the US, followed by rate hikes, and locally, a potential third wave, which mimics the second wave in terms of severity.'
Post the correction over the past one year, we are seeing opportunities across sectors.
Also keenly watching inflation numbers, with wholesale inflation data expected today
The large current account deficit and the growing vulnerability on the external front have largely contributed towards the secular decline and the current volatility of the rupee.
It was a roller-coaster week for the markets, amid talk of a fiscal stimulus by the government. Saurabh Mukherjea, chief executive officer, and Prashant Mittal, strategist, at Ambit Capital tell Puneet Wadhwa the recent flows into equity mutual funds are largely speculative in nature and pose a risk of reversal.
Most investors find it very hard to understand when markets have over-extended themselves and look for data points to understand when a correction is due.
When big offers hit the market, broader indices corrected 2-4%
The year 2014 has been one of the best for investors in the equity markets.
Investors not stop their SIPs or STPs due to election-related uncertainty.
Between now and the general elections (likely in May 2019) there are 12 assembly polls, which analysts say, in a way will also be interpreted as a referendum on the Modi-led government's key reforms
The Indian government and RBI must keep foreign equity investors happy and avoid crushing growth expectations, notes Akash Prakash.
The rupee's fall against the dollar is bad news for companies which have increased their exposure to foreign currency loans in recent years.
Year 2017 will be a benign year for FII flows into India feels Akash Singhania, deputy chief investment officer, DHFL Pramerica Asset Managers.
India's rupee is likely to remain under pressure due to high prices of crude oil and other commodities, and may stabilise at around 79-80 against the US dollar in the near term, say experts amid limited headroom available with the Reserve Bank to check the weakening of the domestic currency. The currency has slumped over 5 per cent this year after Russia's invasion of Ukraine sent international crude oil prices soaring to a decade high. On Monday, rupee ended at a fresh all-time low of 78.34 (provisional) against the US dollar.
The broader markets were marginally higher with mid-caps and small-caps gaining 0.1-0.4 per cent on the BSE.
The Indian diaspora remain bullish despite single-digit equity market returns since May 2014, says Pavan Burugula.
The rupee may also gain against the euro but be prepared for a snapback in the euro as Greece resolves.
The RBI's policy decision would be the major event driving trading sentiment in the equity market this week, while global cues, foreign funds movement and crude oil prices will be the other key factors to watch out for, analysts said. Markets have been witnessing a rebound recently. However, the move lacks decisiveness amid lingering challenges like global policy tightening due to soaring inflation and geopolitical tensions, they added. "RBI policy, global macro numbers and crude oil prices will set the trend for this week.
'Overall, the Indian economy is doing well.' 'Our economic fundamentals are strong and the early signs of recovery are sustainable.' 'This is positive for the market in the long run.'
The Bank Nifty is likely to be a bellwether.
Experts say the BSE Sensex could rise to around 32,000 in a year.
'India is still a cash economy.' 'For a common household, almost everything from grocery to maid services is paid in cash.' 'The demonetised notes account for 85 per cent of the currency in circulation.' 'Until fresh notes flow back into the economy, day-to-day transactions ordinarily done in cash will be impacted.'
Chances of a sudden collapse in the Shanghai Composite are remote.
The sector faces many challenges and calls for prompt corrective action.
'In the short term, we may see some disruptions due to Covid, but in the medium-to-long term, we should keep an eye on US inflation and 10-year bond yields.'
The Nifty's put-call ratios are very bearish.
Even US equities are now back to end-2014 levels.
Higher growth, reform bets have boosted returns but leave limited room for error.
