Rupee at historic low, equities crash – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/todays-paper/rupee-at-historic-low-equities-crash/article65202752.ece

Mumbai: People examine the Sensex updates on a screen outside the Bombay Stock Exchange (BSE) building, as the market goes down 1700 points, in Mumbai, Monday, March 7, 2022. (PTI Photo/Shashank Parade)(PTI03_07_2022_000162B)

Mumbai: People examine the Sensex updates on a screen outside the Bombay Stock Exchange (BSE) building, as the market goes down 1700 points, in Mumbai, Monday, March 7, 2022. (PTI Photo/Shashank Parade)(PTI03_07_2022_000162B)

Mumbai: People examine the Sensex updates on a screen outside the Bombay Stock Exchange (BSE) building, as the market goes down 1700 points, in Mumbai, Monday, March 7, 2022. (PTI Photo/Shashank Parade)(PTI03_07_2022_000162B)

Mumbai: People examine the Sensex updates on a screen outside the Bombay Stock Exchange (BSE) building, as the market goes down 1700 points, in Mumbai, Monday, March 7, 2022. (PTI Photo/Shashank Parade)(PTI03_07_2022_000162B)

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Mumbai: People examine the Sensex updates on a screen outside the Bombay Stock Exchange (BSE) building, as the market goes down 1700 points, in Mumbai, Monday, March 7, 2022. (PTI Photo/Shashank Parade)(PTI03_07_2022_000162B)

Mumbai: People examine the Sensex updates on a screen outside the Bombay Stock Exchange (BSE) building, as the market goes down 1700 points, in Mumbai, Monday, March 7, 2022. (PTI Photo/Shashank Parade)(PTI03_07_2022_000162B)

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Indian unit dips 76.93 to a dollar; Sensex loses 1,491 points; Nifty below 15,900

With global crude oil prices hitting $130 a barrel as a fallout of the escalating conflict between Russia and Ukraine, equity and financial market sentiments were spooked on Monday. The rupee closed at a life-time low of 76.93 to the US dollar (USD), andthe two benchmark stock indices, Sensex and Nifty, fell by 2.74 per cent and 2.35 per cent, respectively,as foreign portfolio investors (FPIs) continued to press the exit button.

RBI sells dollar

Dollar sales by the Reserve Bank of India through public sector banks at the Rs. 76.97/98-per-USD level prevented the Indian unit from breaching the 77-mark, according to currency traders. The rupee closed 76 paise weaker against the previous close of 76.17. In after market hours, it breached the 77-mark, testing 77.11 per USD.

“Brent crude oil touched $130 a barrel. FPIs are pulling out their money from Indian markets and oil marketing companies are buying dollars for their imports. Hence, there is a lot of demand for dollars. However, dollar supplies are insignificant. Very few exporters sold dollar at 76.97 levels. The expectation among exporters is that the rupee will go beyond 77 in the coming days. So, all these factors are weighing down the rupee,” said the chief dealer of a private sector bank. Moreover, the dollar index has gone beyond 99, making that currency very strong.

The rupee has been among the worst performing Emerging Market (EM) currencies so far in CY2022, after the Russian rouble and the Turkish lira, led by the heavy dependence on imports for meeting its energy needs, said an ICRA report.

Given that the rupee is showing a depreciating bias and with the likely delay of LIC’s IPO, experts feel market participants may quote a higher premium for placing their bids to participate in the USD/INR 2-year Sell/Buy Swap auction for $5 billion, scheduled for Tuesday.

The high crude oil prices impacted the Government Securities (G-Secs) market, too, with yield on the benchmark 10-year G-Sec (coupon rate: 6.54 per cent) jumping to close about 7 basis points higher and its price declining about 52 paise. The yield of this paper closed at 6.8877 per cent (previous close: 6.8136 per cent). The last traded price of this paper was Rs. 97.53 ( Rs. 98.0475).

Deep cuts in equities

While the Sensex closed at 52,842, down 1,491 points, hitting an eight-month low, the Nifty closed at 15,863, down 382 points. Experts said the markets will be eyeing the US Federal Reserve policy meet this month, wherein an aggressive rate hike is expected. However, there is a changing view among the analysts who now believe that the Russia-Ukraine conflict has altered the scenario and such a hike may be postponed.

The Nifty is near its key levels of 15,800 and 15,500, which may be tough to break unless the news worsens, analysts said.

In a few hours after the markets closed for the day, Brent crude prices were seen retreating from their highs. Any long-term ceasefire in the Russia-Ukraine war could lead to a short-term market rally, analysts said. Along with oil, even global stock futures were off the lows hit during the day after reports suggested that Russia had offered some conditions to end military operations.

FPIs exit

In just four trading sessions of March, FPIs have sold stocks worth nearly Rs. 20,000 crore in the cash segment. In the index futures, the FPI selling so far in March has totalled Rs. 4,506 crore and Rs. 1,778 crore in stock futures. Last Friday, in a single session, FPIs sold stocks worth more than Rs. 7,600 crore in the cash segment alone indicating panic.

Oversold markets

Reportedly, amid the ongoing war, Peter Oppenheimer, chief global equity strategist at Goldman Sachs, has said the equity markets looked oversold to him. Some markets in Europe were trading near their multi-year lows.

“Nifty is close to being oversold at 15,800. There is a 300-point risk with the risk reward favourable to the upside towards 16,800. The rising USD and commodity prices have created bullish opportunities in IT stocks, metals, and oil and gas,” said Rohit Srivastava, chief strategist, Indiacharts.

Ruchit Jain, lead researcher at 5paise.com, said traders should avoid aggressive market bets as of now. “Today’s low of 15,700 will be important support to watch and if that gets breached, 15,300 will be the next level. On the flipside, 16,200 and 16,400 will be seen as immediate resistances.”

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