Stock markets are expected to extend their losses as investors benefit from a sharp hike in the U.S. federal funds rate this month, pointing to weakness in global peers.
India’s stock market fell for a third straight session on September 16, following global markets as higher-than-expected August consumer inflation in the United States responded to federal aid as a major boost to consumer spending next quarter.
BSE Sensex and Nifty of the national stock exchange fell more than 2.3 percent in the last three trading sessions.
“Prashant Tape, the Research Analyst and Senior Vice President (Research), Mehta Equities, stated that equity markets “are expected to extend losses in Friday morning trade, reflecting weakness in global indices, as investors brace for a sharp hike in US interest rates following the release of expected growth data recently.”
However, Rudd said he now thinks the Fed will raise interest rates by 75 basis points at its Sept. 21 meeting. The session will then increase by the same amount in November and 50 points in December…A basis point is 1/100 of a percentage.
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Here are some reasons for the decline in the Indian market.
IT shares fall: India’s five most valuable IT companies have lost 1.60 trillion rupees in market value in the past four sessions amid a global sell-off in stocks following the release of US growth data in August.
Infosys has written nearly Rs 54,000 crore of market capitalization in four periods and TCS has written nearly Rs 76,000 crore of investor wealth.
HCL Technologies, Tech Mahindra, and Wipro have raised Rs 14 billion, Rs 10 billion, and Rs 8 billion respectively.
TI shares have declined since the beginning of the year. A recent downgrade by Goldman Sachs further dampened investment sentiment as a sharp rise in interest rates put the US, India’s largest market for IT services companies, at risk of a recession.
The Nifty IT index has fallen by 30% since the beginning of the year. Infosys lost 26%, TCS 19%, HCL Tech 31%, Tech Mahindra 41% and Wipro Ltd 43%.
India’s economic growth forecast cut: Various agencies cut their forecasts for India’s economic growth after the June quarter when gross domestic product data showed Asia’s third-largest economy grew by 13 percent, 1 percentage point slower than expected last year. have reconsidered.
On Thursday, Fitch downgraded India’s FY23 growth rating to 7.8% from a forecast of 7.8%, with higher growth and higher interest rates. He lowered his forecast for the next fiscal year from 7.4 percent to 6.7 percent.
Moody’s cut its real growth forecast for 2022 to 7.7% from a previous forecast of 8.8%.
Goldman Sachs cut India’s growth forecast for FY22 to 7% from 7.6%. Morgan Stanley said there was a downside risk of 40 basis points to its March 23 growth forecast of 7.2 percent. Citigroup cut its FY23 growth forecast from 8% to 6.7%.
Federal Reserve rate hike: Analysts expect a significant rate hike after the August US growth data. Markets currently expect the final federal funds rate to be 4.25%. Analysts predict a 20% chance of a 100-point increase in next week’s policy announcement.
Reserve Bank of India: Consumer price inflation in India eased to 7.0% in August from 6.7% in July. Analysts now expect the Reserve Bank of India’s Monetary Committee (MPC) to raise interest rates by 50 basis points to 5.90 percent at its next meeting on September 30.
If inflation remains at the same level, we believe the RBI may hike in December, although we don’t expect any further action in December, things are calm, the analyst added.
Commodity prices: Over the past week, London Metal Exchange (LME) nickel rose 7.3%, LME aluminum 2%, LME zinc 0.5%, LME copper 1%, 3%, and LME tin 1%.
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Last arrow: Well, the Sensex sold off on the third day. Look at the RBI policy.
global markets, furthermore foreign currencies, and the U.S. dollar.
The 30-share BSE Sensex opened in the red, down more than 800 points during the session. It closed at 567.98, or down 1.02%, to 55,107.34.
The broader NSE Nifty was down 153.20 points or 0.92% at 16,416.35.
Titan was the biggest loser in the Sensex basket, down 4.48%, followed by Dr. Redis, Larsen & Toubro, HUL, Asian Paints, Bajaj Finance, TCS., and Nestlé Indiana.
Only five accounts – NTPC, Maruti, M&M, Bharti Airtel, and Reliance Industries – gained 1.35%.
The RBI is expected to announce its monetary policy on Monday as interest rates are expected to rise to keep inflation above the central bank’s ceiling.
Investors must now closely watch the Reserve Bank’s policy pronouncements due to market volatility.
There were three reasons why the Sensex fell below 600 on Thursday.
1. US Federal Reserve FOMC Protocol
The tone of officials reflected in the US Federal Reserve’s policy minutes in December not only indicated on the minutes that the price could come in earlier than expected after the increase, but the balance sheet could fall after the increase.
Participants frequently claim that because of their perspectives on the economy, the labor market, and the economy, participants might observe a rise in the speed of supply of funds sooner or later than expected.”.
Many participants also expressed the opinion that it could be wise for the Federal Reserve to reduce the size of its balance sheet once the federal funds rate starts to climb, according to the minutes.
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2. Covid-19 is growing rapidly, the threat is omicron
In the past 24 hours, 90,928 new cases of Covid-19 have been reported in India, increasing the number of daily infections by more than 56%. According to government records, the number of Omicrons is around 2,630.
The spread of the virus has led to new restrictions and travel restrictions at home and abroad. Some cities such as Mumbai and New Delhi have announced limited plans, while others have used 50% of residents in hotels and other amusement parks to limit overcrowding. Hong Kong banned entry from India on Wednesday.
3. Special meanings
Technically, the Nifty has been falling since the end of November after the 20-day DMA (daily range) fell below the 50-day DMA on November 25, 2021. DMA for trading The next three consecutive DMAs give the prospect of a possible change.
For the reversal to materialize, Nifty will not only need to hold above the unique 17,500 level, but the 20-day DMA (now around 17,260) will also need to break the default 50-day DMA at 17,485. That. strong as they fight for victory.