Dollar, outflow from foreign investors dampen sentiment

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Dollar, outflow from foreign investors dampen sentiment

In four trading sessions, investors on Dalal Street witnessed an erosion of 13 lakh crore of wealth as a rise in the dollar index and outflows by foreign institutional investors dampened sentiment amid weak global cues. The market value of the BSE listed firms fell to Rs 270 lakh crore in the afternoon trade on September 26 from Rs 283 lakh crore on September 20 despite the ongoing selling in the stock market.

The benchmark equity index BSE Sensex was down 4 per cent to 57,272. Santosh Meena, Head of Research at Swastika Investmart said that a 75 basis rate hike, along with hawkish commentary by the US fed, is leading to weakness in the rupee and outflow from foreign investors, which is a result of the ongoing turmoil in the Indian equity market. We are seeing pressure in the Indian equity markets. Share Market News Today Live Updates: Indices off the day's low, Sensex down over 700 points, Nifty below 17,100; IT stocks rebound.

Despite recent weakness, Meena added that rupee is still one of the best performing currencies amid turbulence in other emerging market currencies. He said that we showed strong resilience for a long time but can't remain in isolation for a long time if global markets are in serious trouble.

The dollar index has jumped to over 113 marks from the 110 level on September 20. The rupee was at a new all time low of 81.60 against the dollar at around 12.40 pm IST from 79.77 on September 20.

As volatility grips all segments of the markets, Anil Kumar Bhansali, head of Treasury, said that Rupee would remain in a range of Rs 81 to 81.60, as a result of the ongoing fall in the currency market. The dollar is very overbought at these levels. Foreign institutional investors FIIs turned net sellers in the second half after an inflow of over 12,000 crore in the first half of September. They sold shares worth more than 4,000 crore from September 16 to September 23.

The US stock market closed lower for the week ending September 23 because of the fear of a hike in interest rates by the US Fed. On Friday, the S&P 500 plunged 1.7 per cent, Dow Jones lost 1.6 per cent, while Nasdaq was down 1.8 per cent. The three indices fell in the range of 4 -- 5 per cent testing fresh 2022 low for the week.

The dollar went up to a 22 year high and bonds sold off again as fears grew that a central bank policy of raising interest rates to tame inflation will cause major economies to go into a recession. The 10 year US Treasury held near 3.7 per cent, the highest level since 2010.

Mitul Shah, Head of Research at Reliance Securities said that the US stock market was trading down after Federal Reserve officials raised interest rates by 75 basis points for a third straight week and Chair Jerome Powell implied in hawkish remarks that policymakers were prepared to accept economic pain in exchange for price stability. The market will be watching the inflation numbers from the US and Europe. Indian equity markets may continue to outperform, so this dip should be taken as a buying opportunity. The domestic economy facing sectors like financials, capital goods, Infrastructure, real estate, auto and consumption will continue to do well, but some value buying can be seen in IT, pharma, and chemical names, Meena said.