More interest rate cuts by the US Federal Reserve to protect its slowing economy are likely to strengthen gold prices further with the metal being a safe haven for investors having offered handsome returns in the last year-and-a-half.
We have not suffered such huge price shocks across so many basic commodities, at the same time, in decades. Has the inflationary impact of all this been factored into stock prices as yet, asks Debashis Basu.
The sudden movement of the rupee - post the monetary policy - is not a reason to panic, said currency dealers. According to them, a correction was overdue for the rupee that remained the best performing currency in the region for well over a month. The rupee closed at 74.72 a dollar on Friday from its previous close of 74.60. It had dropped 1.52 per cent against the dollar on April 7 after the Reserve Bank of India (RBI) announced its monetary policy, committing to buy Rs 1 trillion of bonds in the June quarter. A weak rupee goes well with the export narrative of the government, and is consistent with the RBI's intervention strategy that prevented an appreciation.
The faster-than-expected rise in interest rates by the US Federal Reserve (US Fed) shook global financial markets in early 2022. And now the ongoing war between Russia and Ukraine has lifted commodity prices, with Brent crude oil hitting a 14-year high of $139 a barrel in intraday trade. All these developments have sent the equity markets across the world into a tailspin.
This is the first hike in about a decade, signaling a recovery.
Top gainers from the Sensex pack are Asian Paints, Bajaj Auto, ITC, NTPC, L&T and HDFC, all up 2% each
'I was feeling so suffocated under Yogiji's rule.'
A day after Federal Reserve Chairman Ben Bernanke announced the rate cut, FIIs bought shares worth over Rs 2,400 crore (Rs 24 billion), lifting the index up by 650 points, one of its biggest intra-day gains.
HDFC, TCS, RIL, ITC and ICICI Bank dragged the Sensex by over 100 points.
'Avoid going overweight on gold. But maintain a 10 per cent allocation via sovereign gold bonds,' Bajaj Capital MD Sanjiv Bajaj tells Sarbajeet K Sen.
RBI will take a cue from the Fed policy statement.
There are more near-term global draggers in store for the domestic stock market, as the central banks across the US, Japan and Europe are likely to further hike their benchmark interest rates
However, dollar's rise against other currencies overseas capped the gains
'Markets are factoring in a good show by India Inc in Q2.'
Titan was the top laggard in the Sensex pack, shedding 1.39 per cent, followed by HDFC, Axis Bank, Kotak Bank, HCL Tech and Tech Mahindra. On the other hand, Asian Paints, SBI, M&M, TCS, Bajaj Finserv and ICICI Bank were among the winners, spurting as much as 3.25 per cent.
The broader markets ended negatively with mid-caps and small-caps shedding 0.5 per cent on the BSE.
Bajaj Finserv was the top gainer in the Sensex pack, rallying around 7 per cent, followed by Bajaj Finance, HDFC, L&T, ICICI Bank, Sun Pharma and NTPC. On the other hand, Tech Mahindra, ITC and M&M were the laggards.
The markets have been unable to sustain at higher levels as a rise in bond yields globally, especially in the US have dented sentiment. Surging commodity prices, especially crude oil that have now hit $70 a barrel (Brent) coupled with inflation woes and fear of sporadic lockdown across major economic hubs back home as Covid cases rise have chased the bulls away. In the short-term, analysts expect the markets to remain volatile as they react to news flow - both from overseas and developments back home. Investors, they say, need to keep a tab on how the US treasury yields move, which in turn will have a ripple effect on how big money moves across developed (DMs) and emerging markets (EMs), including India.
The Reserve Bank may be hitting the end of its tolerance for high inflation and will most likely hike interest rates in the first half of 2022, analysts said on Friday. The central bank will also start rolling back its accommodative policies which have led to easy liquidity conditions, they said. The view from analysts came even as inflation cooled down to 5.6 per cent for July, after two months of breaching the upper end of the RBI's tolerance band of 6 per cent.
The dollar-rupee rate could move in the opposite direction if dollar policy rates rise and the FPIs sell in December, says Devangshu Datta.
Experts say foreign investor sentiment was bolstered by the US Federal Reserve's decision to go slow with interest rate hikes and hopes of political stability.
Given the economic trends, it might make sense to allocate some savings to gold.
The markets are in bubble territory.
Benchmark share indices opened lower on Monday, amid weak global cues, as investors turned cautious ahead of the US Federal Reserve stance on interest rate.
Losers included Bharti Airtel, SBI, Wipro, Vedanta, Maruti Suzuki, ICICI Bank, Axis Bank and Reliance Industries, falling up to 2.18 per cent.
'Thankfully, most investors in India have now seen through this false narrative and are once again deploying their hard-earned money.
After rallying over 300 points, the 30-share BSE Sensex ended 169.14 points, or 0.42 per cent, higher at 40,581.71. Similarly, the broader NSE Nifty settled 61.65 points, or 0.52 per cent, higher at 11,971.80.
As if wanting to be an antidote to the coronavirus pandemic, the Indian stock market adorned carnival robes in 2021 with a tsunami of liquidity unleashed by global central banks coupled with supportive domestic policies and the world's largest vaccination drive sparking off a world-beating rally on Dalal Street, despite bouts of uneasiness over fizzy valuations. While the wider economy shuttled between recovery and relapse, dictated by multiple mutations of the virus, equity market benchmarks appeared headed in just one direction -- skywards. The dizzying upward journey has added a whopping Rs 72 lakh crore during 2021 to investors' wealth, measured as the cumulative value of all listed shares in the country, taking it to nearly Rs 260 lakh crore.
Bank of America (BofA) Securities expects India to be the third-largest economy in the world by 2031. The economic rise could become a reality by 2028, but the Covid pandemic delayed the pace, BofA Securities economists Indranil Sen Gupta and Aastha Gudwani wrote in a report.
Thus far in FY21, BSE, NSE have rallied 70 per cent and 71 per cent, respectively.
'Sectors that had been left out till now will also start participating in the rally.'
The impact of the Iraqi war on the US economy cannot be gauged until enough critical data relating to the period since the war's onset is available over the next several weeks, Federal Reserve policymakers said on Monday.
The central bank can directly print money and finance the government, but it should avoid doing so unless there is absolutely no alternative, former RBI governor D Subbarao on Wednesday said while pointing out that India is 'nowhere' near such a scenario. In an interview with PTI, Subbarao suggested that to deal with the second wave of COVID-19 induced slowdown in the economy, the government can consider Covid bonds as an option to raise borrowing, not in addition to budgeted borrowing, but as a part of that.
n the broader market, BSE Midcap and Smallcap indices are trading higher by 0.3% each.
Kotak Bank was the top loser in the Sensex pack, shedding over 2 per cent, followed by ICICI Bank, PowerGrid, HDFC, IndusInd Bank and Axis Bank. NSE Nifty declined 45.75 points to 16,568.85.
While FIIs have pumped in nearly Rs 17,000 crore, MFs have been net buyers to the tune of Rs 9,000 crore.
The report did not specify the impact the rate hike will have on India.
Devangshu Datta predicts the good, the bad and the ugly of currency trends for the coming year.
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