Sensex, Nifty End 3-day Winning Streak as Fears of Aggressive Fed Hike Spook D-Street Bulls. Here’s Why


The Indian fairness markets snapped their three-day rally and misplaced over 1.5% on February 11 intraday after US shopper costs knowledge got here in hotter than anticipated. In line with soured world sentiment on excessive US inflation knowledge and price hike fears, the benchmark indices began commerce on a extremely destructive word a day after RBI’s dovish coverage had calmed the markets. The key benchmark indices proceed to stay on slippery floor with IT shares as the foremost laggards. At shut, the Sensex was down 773.11 factors or 1.31% at 58,152.92, and the Nifty was down 231 factors or 1.31% at 17,374.80. About 896 shares have superior, 2318 shares declined, and 105 shares are unchanged.

“The sharp reduce available in the market seen on Friday is because of a pointy soar in US bond yields resulting from 4 decade-high inflation. However, most of this worry is already factored in. That stated, we have to wait and watch how the market will negotiate a high-interest atmosphere. Technically, the Nifty faces resistance in a cluster of 20-DMA and 100-DMA at 17,600-17,650 ranges, whereas 17,300 is an instantaneous and necessary assist stage and 17,000-16,800 is a vital demand zone. We stay bullish on the street forward until the Nifty trades above the 16,800. A breakout above 17,800 may even see it head in the direction of a contemporary all-time excessive,” said Santosh Meena, Head of Research, Swastika Investmart.

Here are the reasons markets dropped sharply today:

US inflation data

US Labor Department data showed consumer prices surged 7.5 per cent last month on a year-over-year basis, topping economists’ estimates of 7.3 per cnet and marking the biggest annual increase in inflation in 40 years. Global markets fell further after St. Louis Federal Reserve Bank President James Bullard said the data had made him “dramatically” more hawkish. Bullard, a voting member of the Fed’s rate-setting committee this year, said he now wanted a full percentage of interest rate hikes by July 1.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, explained that “US inflation in January came worse-than-expected at 7.5 per cent pushing the 10-year yield to 2.03 per cent discounting a hawkish Fed, which may raise rates by at least by 100 bps this year. A rate hike by even 50 bps in March is looking probable now. This is not good news for global equity markets.”

RBI coverage meet

The MPC, opposite to market expectations, stored the reverse repo price unchanged whereas sustaining the accommodative stance. The MPC forecasts FY2023 actual GDP development at 7.8 per cent and the FY2023 CPI inflation at 4.5 per cent. “The RBI additionally turned to rebalancing liquidity on a extra dynamic foundation. MPC’s steerage continues to be dominated by development issues and softer inflation trajectory, signaling restricted scope for price actions, not less than, till the June coverage,” Kotak Securities said in a report.

Rupee

The domestic currency weakened to hit 75.38 a dollar on continued selling pressure by foreign investors. FIIs sold $4.45 billion in January and $1.17 billion in February. Between October and December, FIIs sold $5.12 billion in equities.

“We believe the RBI’s unexpected dovish stance with its focus on growth rather than inflation risk is a slight negative for the INR in the near term for the following reasons, including significant monetary policy divergence with other major central banks, concerns over the RBI’s FX stance , and the risk of the RBI being increasingly seen as lagging behind the inflation curve.”, Nomura Research stated in a word.

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