Markets flashing red again, The Indian indices reeled under sustained selling pressure for the third consecutive session on January 6. At 2.10 pm, the 30-pack BSE Sensex was down 607 points, or 1 percent, and the Nifty was down 171 points, or 0.95 percent, at 17,823.
While the market was still adjusting to the FOMC meeting minutes that were released on January 4, some negative developments from the Russia-Ukraine war and RBI Governor’s concern about the inflation situation in South Asia added to the pressure.
Global cues, too, didn’t give much confidence to the Indian shares, which opened flat but soon came under selling pressure.
Here are the factors that are at play on the last day of the week:
Ukraine rejects Russia’s ceasefire offer
The Russia-Ukraine war has been one of the major reasons for the turmoil in the global economy and markets. Russian President Vladimir Putin offered a 36-hour ceasefire but it was rejected by his Ukrainian counterpart Volodymyr Zelensky. The rejection is being viewed as a signal that the war is unlikely to end any time soon and will continue to destabilise the world, affecting the global economy, which would singe equity markets as well. Join Our Instagram Channel
Comments from RBI Governor
Speaking at an IMF event in New Delhi on January 6, RBI Governor Shaktikanta Das at expressed concerns about the inflationary situation in South Asia, which has dampened the growth prospects of the region. He said South Asian economies were facing sustained price pressures and that inflation needs to be tamed in the region. According to Das, global trade and economy look uninspiring and external debt was impacting the macro-economic stability of the region. His views dented the investor’s confidence further.
US Fed continues to remain hawkish
The global markets were looking for some positive commentary from the FOMC minutes but that was not to be. The Fed maintained its stance of continuing to raise interest rates to contain inflation. The markets, which were expecting a pause in rate hikes, were in for a surprise as Fed said that the interest rates will remain elevated for longer. Join Our Telegram Channel
Continued FII selling
Foreign institutional investors have been relentlessly pulling out money from Indian markets. They have sucked more than Rs 10,500 crore from India in the last nine sessions. “While worries over global economic slowdown due to rising interest rates and falling demand continue to weigh, FIIs too have been deserting local markets over the past week,” said Prashanth Tapse – Research Analyst, Senior VP (Research), Mehta Equities Ltd. On January 5 (Thursday), FIIs sold shares worth Rs 1,450 crore while DIIs too joined them and sold Rs 194 crore worth of equities. Join Our Instagram Channel
The higher valuations of Indian stocks, is also a cause of concern. “Clearly, FII money is chasing lower valuations by selling in overvalued markets like India. This trend might continue imparting weakness in the Indian market”, said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Investors are also exercising caution before the release of US inflation data due next week and the domestic inflation data. Any increase or surprise from the expectations will vindicate the US Fed’s stance of keeping the interest rates higher for longer and will continue to negatively impact the equity markets. Join Our Telegram Channel
The investors will now be eagerly looking at third-quarter earnings which will start pouring in from January 9. Any strength in earnings and positive commentary by the corporates might act as a catalyst for the reversal of trends. Till then, experts advise caution before the market gains a clear direction.