In an event-heavy week, stock investors will track ongoing quarterly earnings, the US Federal Reserve's interest rate decision, and macroeconomic data for market direction, analysts said. Moreover, progress in India-US trade negotiations will remain a key focus for investors, an expert said.
Federal Reserve's move has thrown financial markets into a spin.
Among the Sensex constituents, Asian Paints, Tech Mahindra, HCL Technologies, Tata Steel, Maruti Suzuki India, Sun Pharmaceuticals, Tata Consultancy Services, ICICI Bank, Bajaj Finance, UltraTech Cement, Mahindra & Mahindra and Tata Motors Passenger Vehicles were the laggards. However, Eternal, Titan, Adani Ports, Bharat Electronics Ltd, State Bank of India, Bajaj Finserv, NTPC and Bharti Airtel were among the gainers.
In 1910 the who's who of Wall Street met in total secrecy in an American town to work towards the first draft of the bill that would finally give the United States a central bank.
By piling more pressure on governments, central banks risk not accomplishing much and yet provoking a political backlash that could threaten their independence.
Gold prices rose by Rs 70 to hit yet another record high of Rs 98,170 per 10 grams in the national capital on Thursday amid firm global demand, according to the All India Sarafa Association. On Wednesday, the precious metal of 99.9 per cent purity soared by Rs 1,650 to hit an all-time high of Rs 98,100 per 10 grams.
The Reserve Bank is likely to maintain status-quo on the key interest rates for the third time in a row in its upcoming bi-monthly policy review despite the US Federal Reserve and the European Central Bank hiking benchmark rates, as domestic inflation is within the RBI's comfort zone, say experts. The borrowing cost which started rising in May last year has stabilised with RBI keeping the repo rate unchanged at 6.5 per cent since February when it was raised from 6.25 per cent. In the previous two bi-monthly policy reviews in April and June the benchmark rate was retained.
'If it doesn't, it will continue with measures to infuse liquidity, signalling a new cycle,' predicts Tamal Bandyopadhyay.
Overseas markets are already hit by an acute dollar crunch, which is why major central banks, the US Federal Reserve, the European Central Bank and the Bank of England, had to infuse funds into the market. These lines of credit are over and above the stand-by credit, which is usually maintained by foreign banks with the Indian banks.
Announcement of macroeconmic data such as industrial production and inflation, the US Federal Reserve's interest rate decision along with trends in global equities would dictate movement in the stock market this week, analysts said. Besides, foreign fund trading activity would also guide the trends in equities. "All eyes are now on the US Fed policy outcome for cues, which is scheduled on June 14. In the following sessions, the European Central Bank (ECB) and Bank of Japan (BoJ) will also announce their policy decisions.
'Higher interest rates make gold less attractive as it doesn't generate yield.' 'However, with rates set to fall, the tables are turning for gold.'
For the banking system a new cycle starts in FY2024. It's fraught with fresh challenges on asset quality and profitability, warns Tamal Bandyopadhyay.
Of the eight RBI governors who have held office since the 1991 economic liberalisation, Bimal Jalan had the longest stint and S Venkitaramanan, the shortest. Current Governor Shaktikanta Das will overtake Bimal Jalan before completing his second term in December, points out Tamal Bandyopadhyay.
The broader markets ended lower with mid-caps and small-caps falling over 1 per cent on the BSE.
India's prices are rising faster than many of its emerging market peers. The country's inflation print for May at 4.25 per cent is a marked reduction from the levels seen in May 2022 (7.04 per cent). However, even though the inflation rate remains within the Reserve Bank of India's medium-term target of 4 per cent, with a 2 per cent margin on either side, it continues to be higher than China, Russia, and Brazil.
The RBI is fully aware that the high-cost loans and high indebtedness of the borrowers could pose financial stability risks, if not addressed by these NBFCs. Governor Shaktikanta Das has issued a stern warning, saying the RBI is closely monitoring these areas and will not hesitate to take appropriate action, if necessary, if the culprits don't opt for self-correction. Watch out for some action, soon, notes Tamal Bandyopadhyay.
Foreign portfolio investors (FPIs) sold shares worth Rs 20,170 crore ($2.4 billion) recently. This marked the fifth-highest weekly outflow from overseas funds since the beginning of 2008 and the largest since the last week of March 2020. Due to the Covid scare, FPIs had sold shares worth Rs 21,951 crore during that week, causing the market to decline by nearly 20 per cent.
Markets slumped for fourth straight session this Monday as investors braced for the central bank meeting with caution.
Equity benchmarks Sensex and Nifty faced heavy drubbing on Thursday, falling over 1 per cent each, in tandem with weak global markets following the US Federal Reserve's interest rate hike and its hawkish stance. The 30-share BSE Sensex tanked 878.88 points or 1.40 per cent to settle at 61,799.03. During the day, it tumbled 962.3 points or 1.53 per cent to 61,715.61.
Grand schemes for macroeconomic policy coordination have a mixed record.
As the results season kicks in, the quarterly earnings numbers of several blue-chip firms -- such as Infosys and Reliance Industries -- along with global trends and trading activity of foreign investors, will determine equity market movement in the holiday-shortened week ahead, according to analysts. The domestic WPI inflation data for June -- scheduled to be announced on Monday -- will also influence trading sentiments, traders said. Markets will remain closed on Wednesday for Muharram.
Markets extended gains in afternoon trades and touched the highs of the day with buying interest seen in banking and realty shares. The Sensex was up 247 points at 17,085. Nifty is up 81 points at 5,180.
Spot gold rose $8.32 an ounce to $1,474.56 by 0624 GMT, well below a lifetime high around $1,920 an ounce hit in September 2011.
'When I came here in 2002, I said you can grow at 8%.' 'And I was told that was crazy, and (now) here we are.'
The Nifty ended at 5,060, down 94 points.
'India's fundamentals are a lot better (than those of other emerging market economies).' 'India will suffer (witness a fall in its stock market) what I call the second order effect.' 'And the second order will happen when these funds (belonging to macro and hedge fund investors and which have leveraged Japanese yen-carry trades), because they lose money elsewhere as lot of their positions were financed by borrowing Japanese yen, will have to book profits in investment destinations where they are making money, including in markets like India.' 'They (these investors) will have to effectively sell in countries like India and which is the consequence (the crash in equity markets) that Indian markets might see.'
India needs foreign exchange buffer reserves to insulate itself from exchange rate volatility as we have "no friends" for swap lines and Japan was the only country that helped during the taper tantrum in 2013, former RBI Governor Raghuram Rajan said on Tuesday. Participating in a virtual event organised by economic think tank NCAER, Rajan said during the taper tantrum in 2013, India asked for swap lines, and only country who helped was Japan. "We need this (foreign exchange) reserve buffer to insulate ourselves because we have no friends.
Reserve Bank of India Governor Raghuram Rajan took charge of India's central bank when the rupee seemed to be in a tailspin while the country was facing runaway inflation.
'While Indian markets are indeed not inexpensive, the valuations of largecap stocks are still a considerable distance from being overstretched.'
A 2008-style bank run seems unlikely, but if it did happen, the sector is much better prepared.
We may now be experiencing the darker side of the massive monetary stimulus of past years, said Rajan.
Rate-sensitive sectors like banks, realty and auto witnessed heavy selling pressure ahead of the RBI Monetary policy which is scheduled on September 29.
Foreign portfolio investors (FPIs) turned net buyers in October after being net sellers in the previous month. In October, FPIs bought shares worth nearly Rs 8,430 crore ($1 billion) against net selling of Rs 13,405 crore ($1.6 billion) in September. Positive flows during three of the previous four months have pushed the domestic markets towards fresh all-time highs. At present, the Sensex and Nifty are less than 2 per cent shy of breaching record highs logged in October 2021. A rally in equity markets in the US and Europe is in hopes that the Federal Reserve may go soft on rate hikes after its November meeting.
There are already some signs of stress in this market.
But gains in the rupee were kept in check as domestic shares faltered, ending a five-session gain.
'India is not so distant from years of high and entrenched inflationary expectations that it should start trying to play games with the economy the way the West's central bankers think they are entitled to,' argues Mihir S Sharma.
Inflows from Europe, falling crude oil to come to the rescue if rupee cracks against the dollar.
Monetary policy easing, coupled with the relaxation of lending rules and greater election-driven fiscal spending in the first quarter of 2019, will provide some support to growth during the first half of 2019-20 fiscal
The broader NSE Nifty dropped by 48.65 points, or 0.45 per cent to 10,808.05 after shuttling between 10,773.55 and 10,833.70.
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