Explained: Why are markets, rupee falling? | Explained News,The Indian Express

The benchmark Sensex was quoting 1,422 points down at 52,881.23 and the Nifty Index was trading 408 points lower at 15,793.15 as of 12.15 noon IST.

Domestic stock markets and the rupee faced rough weather in early trading on Monday as the sharp rise in US inflation triggered concerns over more aggressive rate hikes and stronger capital outflows. The benchmark Sensex was quoting 1,422 points down at 52,881.23 and the Nifty Index was trading 408 points lower at 15,793.15 as of 12.15 noon IST. The rupee plunged below the 78 mark to 78.28 against the dollar in the opening session.

Why the crash?

Indian stocks fell 2.6 per cent in the opening session as equity markets across the globe are witnessing a sell-off after US May inflation data accelerated to four decades high of 8.6 per cent, raising concerns about aggressive rate hikes by the US Federal Reserve in the upcoming monetary policy meeting due on Wednesday. US treasury yields surged to a 14-year high at 3.15 per cent while the dollar index spiked above 104 levels. US futures are also down by one per cent after the big sell-off on Friday. Apart from this, the market would continue to remain cautious ahead of various central banks meetings this week.

On the domestic side, as India’s inflation data is due on Monday, investors are nervous about the RBI’s next plan of action. If retail inflation rises further and crosses 8 per cent level in India, the RBI could increase the policy rates again this month. Yield on India’s 10-year benchmark bond has risen by 7 basis points to 7.59 per cent on Monday.

Overall, domestic and global worries are hurting the sentiment in India. The withdrawal of liberal accommodative policies in India and other countries, mainly the US, is prompting the investors to press the sale button. Capital outflows by foreign portfolio investors are likely to continue in such a scenario.

https://indianexpress.com/article/explained/explained-why-are-markets-rupee-falling-7967028/


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Updated: 1 year ago
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