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Nifty and Sensex set to open lower, tracking the Wall Street sell-off

Source Fxstreet

India’s Nifty and Sensex eye a negative open after the Tuesday turnaround.
Nifty and Sensex bounced on Tuesday amid fresh buying in banking, financial services and IT sector stocks.
With US CPI out of the way, Nifty and Sensex traders await India’s WPI inflation data.

The Sensex 30 and Nifty 50, India’s key benchmark indices, are eyeing a negative open, following a comeback on Tuesday. The Indian indices are likely to track the Wall Street sell-off and the decline in their Asian peers, as markets take account of the hot US Consumer Price Index (CPI) data.

Gift Nifty Index, formerly known as the SGX Nifty, is posting small losses, pointing to a weak start for Nifty and Sensex on Wednesday. The National Stock Exchange (NSE) Nifty 50 index closed 0.59% higher on the day at 21,743.25. The Bombay Stock Exchange (BSE) Sensex 30 settled Tuesday at 71,555.19, adding 0.68% on a daily basis.

Stock market news

On Tuesday, the rebound in Nifty and Sensex was led by fresh buying in banking, financial services and IT sector stocks.
Nifty and Sensex also cheered news that Index provider MSCI raised India's weightage in its Global Standard index to an all-time high of 18.2%.
Coal India, UPL, Axis Bank, ICICI Bank and HDFC Life Insurance Company are among the top gainers on the Nifty on Tuesday.
Meanwhile, top losers included Hindalco Industries, Grasim Industries, Divi’s Laboratories, Ultratech Cement and Bharat Petroleum Corporation.
Hindalco Industries on Tuesday reported a 71% YoY growth in its consolidated net profit at Rs 2,331 crore for the quarter ended December 2023. The profit stood at Rs 1,362 crore a year ago.
Shares of Reliance Industries (RIL) become the first listed Indian entity to cross the Rs 20 lakh crore market capitalization milestone after the stock rallied up to 1.89% to hit a fresh 52-week high of Rs 2957.80 on Sensex.
India’s Multi Commodity Exchange (MCX) index commences trading after a four-hour delay due to technical glitches.
The Lunar New Year holidays in China and some of the major Asian markets could keep the liquidity thin around the Indian indices.
Traders now await the Indian Wholesale Price Index (WPI) release due on Wednesday, with the US CPI data now out of the way.
Data on Tuesday showed that the US annual headline CPI rose 3.1% in January, versus an estimated 2.9% increase. Markets now price in no Fed rate cut in March and a lower than 50% chance of easing in May.

Indian economy FAQs

How does the Indian economy impact the Indian Rupee?

The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.

What is the impact of Oil prices on the Rupee?

India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.

How does inflation in India impact the Rupee?

Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.

How does seasonal US Dollar demand from importers and banks impact the Rupee?

India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

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