NEW DELHI: The BSE Sensex fell for the second session (872 points) on Monday after falling 652 points on Friday as fear of aggressive rate hikes by central banks has started haunting the participants again. The BSE Sensex and the NSE Nifty have shed 1,524 points and 465 points, respectively, since Friday.
This two-session decline has eroded investors’ wealth by more than Rs 6.57 lakh crore and the market capitalisation of all the BSE-listed firms came down to Rs 273.95 lakh crore on Monday from Rs 280.50 lakh crore on Thursday.
Till last Thursday, the two benchmark indices - Sensex and Nifty - had rallied nearly 17-18 % from the lows of June 17 on the back of rebound in foreign fund inflows, softening commodity prices and a better-than-expected Q1FY23 corporate earnings. However, after minutes of the US Federal Reserve July meeting indicated a sharp hike in interest rate to curb inflation, investors were on a selling spree.
An increase in interest rates in the US has a negative impact on Indian markets and the economy as foreign investors start pulling out, foreign exchange reserves start depleting, risk of mounting inflation takes over the economy, the rupee falls against the dollar, among other things.
“Consolidation was triggered in the market in anticipation of tighter monetary policy by the Fed and worries over a slowdown in global economic activity. The current risk reward is not favouring investors. Rising dollar index and higher US10-year bond yield act as the near-term headwinds for the market”, said Vinod Nair, head of research at Geojit Financial Services. The dollar index, which gauges dollar strength against a basket of six currencies, hit a fresh five-week high of 108.26 on Monday and the Indian Rupee pulled back to 79.86/USD levels.