Know how stocks, rupees and bonds in India are reacting

Although the US Federal Reserve raised its key rate by 75 basis points, the biggest increase in 28 years, Indian markets do not seem to be affected yet. Analysts say markets have already priced in the 75 basis point rate hike over the past few days. The Indian stock market and the rupee opened in the green.
How does Sensex react?

Indian stock markets opened on a positive note Thursday morning after global markets cheered the U.S. Fed’s 75 basis point hike overnight. As of 9:16 a.m., the Sensex was 506.41 points or 0.96% higher at 53,047.80, and the Nifty was up 142.40 points or 0.91% at 15,834.60.

In the 30 Sensex shares, ICICI Bank, Bajaj twins, IndusInd Bank, Reliance, SBI, Maruti, Titan and Axis Bank led the gains, reaching 2%. HUL, Nestle, Dr Reddy’s and Bharti Airtel, meanwhile, were the handful of losers.

However, at 11:48 the Sensex tipped and saw a drop from around 280 points to around 52,252 points. The reason for the sudden drop is unclear at this time.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “The forecast of a rate of 3.4% by the end of 2022 and a final rate of 3.8% in 2023 reflects the determination to fight against inflation. However, the currently unknown factor is whether rising rates will tip the US economy into recession.

An analyst said guidance from the US Fed helped calm markets temporarily, but now investors are once again focusing on macro factors such as inflation.
How is the rupee reacting?

After touching an all-time low on Wednesday, the rupee strengthened on Thursday by 15 paise to 78.07 against the US dollar at the opening of trade after the US Federal Reserve raised interest rates by 75 points basis and signaled further rate action to fight inflation. In addition, a firm trend in domestic equities and a weaker U.S. dollar in the overseas market supported domestic unity, traders said.

However, the relentless outflow of foreign funds and soaring crude oil prices have limited the rupiah’s appreciation bias, they added. In the interbank foreign exchange market, the rupee opened strong at 78.06 against the US dollar, then fell slightly to quote 78.07, registering a rise of 15 paise during the last close. It was moving in a very narrow range in early trades. In the previous session, the Rupee closed at a record high of 78.22 against the US Dollar.
How is the bond market reacting?

Bond prices were lower in the morning as yields edged up 1 basis point. However, now the situation has reversed and yields are down 2 basis points and the benchmark 10-year government bond yield is 7.573%.

The US Fed raised interest rates by 75 basis points and announced aggressive rate hikes and targeted interest rates at 3.40% by the end of the year. The US Fed cut growth forecast to 1.7% for 2022 and also for 2023 from earlier forecasts of 2.8% for 2022 and 2.2% for 2023. The US Fed also raised the target to inflation for 2022 at 5.2% but reduced it. for 2023 at 2.6% and at 2.2% for the year 2024.
What are the analysts saying?

“We expect the Dollar Index to remain volatile and may maintain its support level of 103.55 on a closing basis. On the other hand, the Rupee showed weakness after the data from the Dollar Index wholesale prices higher than expected in May 2022. The rupee hit an all-time low against the US dollar on Wednesday.The sell-off in domestic stock markets and rising crude oil prices as well as widening trade deficits are also exerting pressures. We expect the rupiah to remain volatile and could test the 78.55 level,” said Rahul Kalantri, VP (Commodities) at Mehta Equities.

Gaurang Somaiya, forex and bullion analyst at MOFSL, said: “Today the focus will be on the policy statement from the Bank of England and hawkish commentary could keep the pound lower. expect USD-INR (spot) to trade with a positive bias and quote in the range of 77.70 and 78.40.

(With PTI entries)

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