The day after the Bank of India’s backup launched a “dovish” monetary policy, keeping the tariff unchanged during a tenth of the consecutive time, the stock market on Friday fell more than 1,000 points in intra-day trade.
The action was triggered by higher US inflation data and fear of a higher rate increase than expected by the US
Benchmark sensex, which fell more than 1,000 points in the opening session, traded 903 points, or 1.5 percent, down at 58,023.46 and the nifty 268 index was lower at 17,338.10 at 10.35 in the morning at the sales pressure in it, goods – capital capital, financial and realty shares. The IT index fell 2.32 percent.
The Indian market is dictated by trends in the US. Consumer price inflation in the US rose 0.6 percent from the previous month and 7.5 percent a year ago, the largest annual acquisition since February 1982, said the US Labor Department. After inflation report, market price determination shows certainty approaching a 50-base point increase at the US meeting on March 15-16.
The Dow Jones index fell 1.5 percent, S & P 500 1.8 percent and the Nasdaq Composite 2.1 percent on Thursday, triggered sales in other global markets, including India.
On the other hand, the 10-year US Treasury yield jumped 10 basis points to 2.03 percent, crossing a 2 percent level for the first time in 30 months. The two-year treasury yield skyrocketed 26 basis points to 1.61 percent, which was higher than the 10 years at the end of 2021. “The increase in interest rates even 50 bps by the US in March looks more likely now.. This is not good news for the equity market Global, “said Vijayakumar, head of investment strategist at Geojit Financial Services.
What will be the impact on Indian markets?
When interest rates rose in the US, the gap between levels in countries such as India was reduced, giving less incentives for foreign investors to pump money into other markets because they preferred to invest in their homes. This means that foreign capital exits can occur.
After attracting RS 41,346 Crore in January, foreign investors have issued Rs 9,821 Crore in February so far from the stock market, anticipating a rise at the US level. Other impacts will be on the rupee because the capital outflow will put pressure on the value of the currency against the dollar. Rising rates also mean that funding costs and higher fund mobilization in foreign markets will be expensive.
What should be the strategy of investors?
Long-term investors must avoid knee-jerk reactions and continue to invest. While the overweight equity of investors will be wiser to invest aggressively in equity and move some funds in hybrid schemes, experts say that investors who have equity lack weight, can utilize the decline in the equity portfolio.