NEW DELHI: Indian equity market closed in the red for the sixth straight session with benchmark indices - Sensex and Nifty - falling nearly 1% each on Wednesday. In the past 6 sessions, the two indices have shed more than 5%, making investors’ poorer by Rs 5 lakh crore as market capitalisation of all BSE listed firms has come down to Rs 268.40 lakh crore from Rs 283.50 lakh crore six sessions ago.
As per the market experts, India’s equity market, which currently commands a premium over global peers, is likely to remain under pressure as foreign investors are moving towards safe havens following rate hikes by various central banks, weakening of Indian Rupee, rise in bond yields and other prevailing challenges.
The INR again hit a fresh low on Wednesday and closed at 81.94 per US dollar, down from 81.58 in the previous session. The dollar index, which gauges the greenback’s strength against 6 basket currencies, surged to 114.78, a twenty-year high, while the US 10-year Treasury yield rose above 4% for the first time in more than a decade. Foreign Institutional investors (FII) remained net sellers and sold equities worth Rs 2,772 crore on Wednesday.
“Investors continue to be sceptical of the domestic market’s higher premium amid the ongoing global deceleration while foreign investors are fleeing emerging economies in search of safer havens. Although the domestic economy is buoyed by solid fundamentals, the stock market’s appetite for risk has been hindered by the rising worries of a worldwide recession,” said Vinod Nair, Head of Research at Geojit Financial Services.
While the US Fed’s 75 bps rate hike that came last week was anticipated, the hawkish stance indicating 125 bps hikes in the next meets by December 2022 has spooked investors’ sentiment. Experts believe that the speed with which central banks across the globe are hiking interest rates, investors are worried that slackening growth would push key economies into recession.
India’s central Bank, the RBI, is also expected to increase key lending rates by 35-50 bps on Friday. Joseph K Thomas, head of research, Emkay Wealth Management said, “Inflation has become a concern for most major economies, and the central banks are resorting to aggressive rate hikes. This move could push up inflationary pressures, proving counterproductive in the short run.”