Analysts anticipate further weakening in the rupee, say it could breach 82 levels this week
Analysts anticipate further weakening in the rupee, say it could breach 82 levels this week
Indian stocks tumbled on Monday, for the fourth straight session since the U.S. Federal Reserve adopted a hawkish stance to control rising inflation. Following a sell-off in the equity markets by foreign funds, the rupee too hit yet another record low.
The S&P BSE Sensex fell 953.70 points, or 1.64%, to 57,145.22. Intraday the index had slumped 1,060 points.
Sensex stocks that lost the most include Maruti (5.49%), Tata Steel (4.22%), ITC (3.96%), Axis Bank (3.40%), NTPC (3.35%) and Bajaj Finance (3.34%).
The NSE Nifty-50 index too plunged 311.05 points, or 1.8%, to 17,016.30.
“The Nifty attempted a pullback from lower levels but the bears had a firm grip as the index witnessed selling pressure on pullbacks and it ended a tad above 17,000,” said Ruchit Jain, lead Research, 5paisa.com.
“FIIs have formed more short positions in the index futures segment and they have been selling in the cash segment too [leading to the fall],” he added.
“Recession fears in U.S. and Europe, the Russia-Ukraine war and the political uncertainty in China has further cast a cloud of uncertainty in the global economy. This has led to the U.S. 10-year bond yields rising to 3.82%, the highest since 2010,” said Sandeep Bhardwaj, CEO, IIFL Securities.
“A slowdown/recession would have an impact on our country’s exports as demand for goods and services would begin to dry up. Hence, for the medium term, we should expect higher volatility in IT stocks,” he added.
The rupee fell for the fourth consecutive session to close 58 paise lower at 81.67 compared with Friday’s close of 81.09 against the U.S. dollar. Analysts said the rupee would depreciate further to 82 level and beyond in this week.
“Hawkish Fed outlook, political instability in China and sell-off in pound after the tax cut announcement is also disturbing the overall market sentiment,” said Gaurang Somaiya, Forex & Bullion analyst, Motilal Oswal Financial Services.
“This week, RBI will release its policy statement and this is likely to influence the rupee that is currently falling sharply against the U.S. dollar,” he added.
Monday’s fall in the rupee could have been higher had the Reserve Bank of India not intervened by selling dollars in the interbank forex market via public sector banks, analysts said.
The RBI has on many occasions made it clear that it would deploy its high forex reserves to prevent excess volatility in the forex market.
