Mumbai: Benchmark equity indices Sensex and Nifty are set to open lower on Friday, and may extend their losing streak to fifth straight session, after prospects of an interest rate hike by US Federal Reserve increased.
Federal Reserve chairwoman Janet Yellen signalled the US central bank may hike interest rates relatively soon. This coupled with strengthening US economic data, make case that Fed may lift rate next month.
The Fed rate hike also seemed imminent as US consumer prices recorded their biggest increase in six months in October on rising pertrol costs and rents, suggesting a pick-up in inflation.
Also, further data on Thursday showed first-time application for unemployment benefits in the US tumbled to a 43-year low last week and new housing units surged to a nine-year high in October.
A strengthening US dollar has left Asian and emerging markets tumbling, with a likely shift in allocation away from riskier emerging market bets.
Nifty futures on Singapore Stock Exchange traded 0.2% lower, hinting at a weak opening of the Indian bourses.
“The December hike has been largely on expected lines. The market has been pricing it in, after Trump came to power,” said market analyst Ambareesh Baliga.
“We may open slightly lower in a knee-jerk reaction to Yellen’s statements, but largely demonetisation continues to weigh on the market,” added Baliga.
On the domestic front, investors have been wary about the corporate earnings outlook in light of the surprise demonetisation move, which was announced on 8 November. On Thursday, benchmark equity indices had tumbled to their lowest close in nearly six months, as investors digested the near-term impact of demonetisaion on the economy.
Also, Republican Donald Trump winning the US election, has cut down the risk appetite globally, hurting emerging market equities.
Late on Thursday, Fitch Ratings said Trump’s victory the uncertainty over aspects of future US policy automatically creates uncertainty for many other sovereigns, to varying degrees.
“The reaction in financial and commodity markets could also affect sovereigns outside the US. Some commodity prices rose in anticipation of US fiscal stimulus,” Fitch Rating said in a report
“But higher US Treasury yields could push up funding costs for other sovereigns, while a stronger dollar may be negative for emerging markets with significant foreign currency debt burdens,” the ratings agency added.
(Reuters contributed to this story)