Home / Markets / Stock Markets /  Rupee  reels,  stocks slip  as  concerns over global growth weigh

Rupee  reels,  stocks slip  as  concerns over global growth weigh

Benchmark indices Sensex and the Nifty fell 1.64% and 1.80% on Monday, capping four straight days of decline. The indices lost more than 4% during the four-day period, wiping out the gains they had made since 28 July (Photo: Mint)Premium
Benchmark indices Sensex and the Nifty fell 1.64% and 1.80% on Monday, capping four straight days of decline. The indices lost more than 4% during the four-day period, wiping out the gains they had made since 28 July (Photo: Mint)

Indian stocks fell to their lowest level in nearly two months amid a worldwide selloff in risk assets and weakness in the rupee, as aggressive rate hikes by central banks across the world sparked fears about a global economic recession

NEW DELHI : Indian stocks fell to their lowest level in nearly two months amid a worldwide selloff in risk assets and weakness in the rupee, as aggressive rate hikes by central banks across the world sparked fears about a global economic recession.

Benchmark indices Sensex and the Nifty fell 1.64% and 1.80% on Monday, capping four straight days of decline. The indices lost more than 4% during the four-day period, wiping out the gains they had made since 28 July.

Double whammy
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Double whammy

“Global risk assets, including equities, extended their selloff on Monday as fears of faster inflation and global recession continued to rise," said Deepak Jasani, head of retail research at HDFC Securities Ltd.

The steep interest rate hikes being undertaken by global central banks from the US to South Africa to rein in runaway inflation have heightened the possibility of a global recession, leading to a selloff in risk assets. The prevailing risk-off sentiment is also aiding a flight to dollar assets, sending other currencies plunging. On Monday, the rupee weakened further to an all-time low, ending trading at 81.62 to a dollar, down 63 paise from the previous day.

The British pound plunged almost 5% to a record low on Monday, before paring losses amid the UK government’s plans to cut taxes and boost borrowings.

A massive rally in the dollar index and collapse in the British pound triggered this move, said Anindya Banerjee, vice-president of currency derivatives and interest rate derivatives at Kotak Securities Ltd. He added that the sharp rise in US and UK bond yields and a selloff in global equities contributed to the bearish sentiments in emerging markets currencies.

Not much respite is expected over the rest of the week as experts see massive two-way volatility across currency pairs, including the dollar-rupee, experts said.

K.N. Dey, the founder of forex risk management firm United Financial Consultants, said the rupee entered “uncharted territory and with the dollar index likely to strengthen from 114 through 117 over a month, more pain could be around the corner with RBI intervention likely only to stem speculative froth".

The global macro construct is not favourable for equity markets in the short run.

The dollar index above 113 and the US 10-year yield at 3.73% are likely to aggravate foreign portfolio investment outflows, said V.K. Vijayakumar, chief investment strategist at Geojit Financial Services.

The rupee could test 82 to a dollar level before taking cues from the Reserve Bank’s monetary policy at the end of this month, said Lakshmi Iyer, chief investment officer (fixed income) and head (products), Kotak Mahindra Asset Management Co.

The FPI buying trend that reversed in July has turned again, with them becoming net sellers of equity in September. On Monday, they net-sold 5,102 crore worth of equities.

Growth concerns are putting pressure on crude, which slipped below $85 for a barrel, the levels last seen at the start of 2022 till about mid-January 22.

The lower crude prices are a big positive for fiscal health.

Brent crude slipped below $85 a barrel, and West Texas Intermediate fell below $80 as the dollar hit an all-time high.

However, the Reserve Bank, post steep rate hikes by the Fed, is under pressure to undertake adequate rate hikes and cushion the rupee. This is further adding to growth concerns.

ABOUT THE AUTHOR

Ujjval Jauhari

Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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