Taking cues from other Asian markets, domestic equity markets were seen taking a strong dive on January 27. After the US Fed’s monetary policy statement on January 26, investors have turned negative about the market. Due to which it has seen a huge decline today. Nifty slipped up to 280 or 1.06 per cent in today’s morning trading on January 27 and touched the level of 16,997. At the same time, the BSE Sensex fell 826 points, or 1.4 percent, to 57,031.
Although the US central bank has not changed interest rates yet, but it has said that it would be better to increase interest rates soon. Apart from this, US Fed Chairman Jerome Powell gave clear indications of further tightening of the monetary policy in the future. This caused panic among investors.
Jerome Powell In a press conference held after the policy meet, the US said that amid the strengthening of the labor market in the US and the possibility of further increase in inflation, which has been running high for several decades, it would be better to raise interest rates as soon as possible to deal with them. He said that I believe that we have ample opportunity to increase interest rates without putting any threat to the labor market.
The market took Jerome Powell’s statement to mean that the US Fed could increase interest rates more than 4 times this year. The effect of which can be seen on the market today. Let us tell you that earlier the market was of the opinion that the US Fed may increase interest rates 4 times this year. Investment bank Nomura believes that the US Fed may increase interest rates by 50 basis points at the Fed meeting in March. Nomura has also said that foreign capital outflows from emerging markets like India may accelerate further due to the rapid increase in interest rates. Since October, foreign investors have withdrawn about Rs 1 lakh crore from the Indian market.
Stock market ready for big fall, US Fed prepared the ground
Along with this, due to the strengthening of the US dollar index, the outflow of foreign money from India has also increased. Since Jerome Powell’s January 26 statement, the dollar index strengthened about 1 per cent on January 26. According to a recent report by JP Morgan India, there is a negative correlation between the Nifty 50 Index and the US Dollar Index. Apart from the impact of yesterday’s commentary by the US Central Bank, there are other factors which are putting pressure on the Indian market. Let’s take a look at these.
Crude oil crosses $90
Crude oil is seen at a 7-year high due to rising tensions between Russia and Ukraine. The price of Brent has again reached near $90.
rising geopolitical tensions
Due to the increasing tension between Ukraine and Russia, all NATO countries including America are seen standing against Russia. Russia has gathered more than 1 lakh troops along its border with Ukraine, due to which the threat of Russian invasion of Ukraine seems to be increasing. The NATO country and the US have threatened Russia that economic sanctions will be imposed on it if it does not give up its aggressive attitude. Due to all this, the prices of crude are also seeing an increase.
pre-budget uncertainty
There is panic in the market ahead of the Union Budget. There are rumors in the market that there may be a revision in long term capital gains tax. Explain that at present, the government levies 10 per cent long term capital gains tax on equity investments.
Lack of any positive surprise in third quarter results
The December quarter results are yet to please investors. The earnings of the companies have been around the expected. However, due to increase in raw material prices, their margins have been affected, due to which analysts are seen cutting their profit estimates for the next financial year.
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