There has been huge volatility in the Indian stock market on Monday before the Reserve Bank of India’s bi-monthly policy and US inflation data later this week. In early trade, both the benchmark Sensex and Nifty saw a fall of about 1 per cent. After this, while making a comeback, the market came in the green mark and then there was a decline. At the end of the session, both the indices closed with a gain of about 0.3 per cent.
Investors are believed to be worried by global central banks’ estimates of liquidity reduction. Many analysts expect RBI to hike rates. Besides, selling by foreign and domestic investors has also increased volatility in the market.
We are giving here the reason for the continued decline in the market for the last few sessions…
Tough stance of central banks
The US job report, released on Friday, showed 7,09,000 more jobs were created in November and December, higher than previous estimates. Analysts said the Fed is preparing to raise interest rates in March and this job report suggests the central bank may have to take a more aggressive approach.
The Bank of England recently raised rates. The Bank of Canada is set for a hike next month. The European Central Bank may also come into action later this year. All eyes are on the US inflation data coming Thursday.
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RBI policy
RBI policy meet: The bi-monthly policy meeting of RBI has started from today and it will give its decision on February 10. Analysts expect the RBI to hike the reverse repo rate on Thursday. With this, normalcy will start coming back. Many analysts estimate that the RBI may increase the reverse repo rate by 20-35 basis points to 3.55-3.6 per cent in the next meeting.
crude oil
Crude oil: According to a Reuters report, due to the cold weather in the US and the current political tussle between the world’s big producers, crude has reached above $ 90, which is a nearly seven-year high. Crude has risen 20 per cent this year and analysts expect it to hit $100 a barrel this year. The strength in crude is negative for the Indian economy, as it affects consumer demand and increases pressure on the Reserve Bank of India to tighten monetary policy.
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Selling of FII and DII
FII, DII selling : There is selling pressure from foreign portfolio investors. FIIs sold $4.45 billion in January and $1.17 billion in February. In the last two to three sessions, selling pressure from domestic institutional investors (DIIs) has increased and they have sold around Rs 1,000 crore in equities.
December quarter results
December quarter earnings: A mixed trend has been shown in the quarterly results. Brokerage firm Jefferies India has downgraded the earnings of 55 per cent companies for the financial year 2022. The pressure on margins has eased due to double-digit increase in the prices of many consumer products. Building material firms Supreme and Finolex saw a 15-18 per cent decline in volumes. Jeffries said cement, steel and generic pharma companies are under pressure from rising input costs.
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