To address concerns over increased interest rates for the near future and escalating geopolitical tensions, the major stock indices Sensex and Nifty fell today for the fourth straight session, leaving investors around Rs 7 lakh crore worse off in four days. Nifty finished the day barely above 17,550 as the Sensex plunged more than 900 points.
When the overall market value of all companies listed on the BSE decreased to Rs 261.3 lakh crore, the market capitalization loss for these days increased to Rs 3.9 lakh crore. During the course of the preceding four trading days, the Sensex has decreased by more than 1,500 points.
Metals, banks, and the financial sector led the selloff today as the fear gauge index VIX rose by about 11%. That both FIIs and local institutions were net buyers in yesterday’s cash market session, and the foreign investors have started to cover their short positions in index contracts.
Investors will now keenly watch the geopolitical events on the Russia-Ukraine front for further clues after the latest macroeconomic data releases. The escalating tensions between Russia and Ukraine may affect international markets, particularly if Putin’s approach makes the crisis worse. Investors will also be looking for more hints on the direction of rate rises in the minutes from the US Fed and RBI.
Reasons for the decline in Indian markets:
Putin’s nuclear warning
Russian President Vladimir Putin issued a nuclear threat to the West in response to the unrest in Ukraine. In a concerning move, Putin announced the deployment of new strategic systems for combat service, suspended a key nuclear arms limitation pact, and threatened to resume nuclear testing.US Secretary of State Antony Blinken criticized this move, calling it “very sad and reckless. Also, the globe would become more hazardous, according to Nato Secretary General Jens Stoltenberg, who urged Putin to rethink his choice.
Fed meeting minutes
The publication of the minutes from the Federal Reserve meeting tomorrow, February 22, has investors on edge throughout the world. Concerns that the minutes will show US policymakers to be unwavering hawkish have decreased market confidence. The minutes of the meeting should include if and how many members supported a higher raise. Felt that to combat inflation, interest rates would have to be raised more than initially anticipated.
This coincides with debates about the need for more interest rate rises in the next few months, sparked by the latest US manufacturer rate index’s stronger-than-expected restoration in January. Investors are closely monitoring the Fed’s stance on interest rates and inflation since it might have a significant effect on the global economy.
Minutes of RBI:
Investors are closely watching the Reserve Bank of India’s minutes of its February rate-setting panel meeting for information about the trajectory of rate increases, which should be made public later on February 22.
The minutes will shed light on the RBI’s decision-making process and might indicate whether any further rate increases are imminent. Investors will also be keeping an eye out for any clues from RBI Vice Governor Michal Patra regarding potential rate rises. During the second G20 Finance and Central Bank Deputies Conference and the inaugural G20 Finance Ministers and Central Bank Governors conference.
Adani Group crisis
A report from American short-seller Hindenburg Research originally set off the four-week-long selloff of Adani Group equities. Since January 24, the market value of the Adani group has decreased by around $142 billion, and there are few indications that the negative trend will reverse. Since the selloff started on January 25, these three equities have had the most declines among the group.
Adani Enterprises, the company’s flagship stock, also dropped by as much as 8.3 per cent, reaching its lowest intraday level since February 6. Investors are worried about the ongoing selloff, which is also expected to have a big impact on the Indian stock market. The repercussions from the research are anticipated to continue to impact the Adani Group’s equities in the days and weeks to come, notwithstanding the Adani Group’s denial of the claims made by Hindenburg Research.
Since the beginning of the year, foreign investors have been offloading Indian stocks, with total transactions so far-reaching, almost $3.37 billion. In 2022, they disposed of Indian stocks worth around $17.21 billion. There are indications that this tendency could be changing, though, since foreign investors started purchasing Indian stocks last week. Several analysts argue that this upsurge in interest in local shares is the result of the attractive pricing being provided.
Foreign investors recently purchased shares, which suggests that they are optimistic about the future of Indian shares. The recent investment made by international investors shows that they have high hopes for the performance of Indian stocks. The Indian economy still faces difficulties, though, and it is unclear if the current increase in foreign investment will continue over the long run.
Earnings for the quarter ending in December
India Inc.’s profitability fell in the third quarter of FY23, and corporate earnings were lower than experts predicted. As the commodities industry underperformed, the finance and automotive industries outperformed. Slowing total consumption was visible in both discretionary and basic spending, reducing company profitability.
Analysts are still cautiously hopeful, though, and believe that the strong Rabi harvest and lowering CPI inflation will eventually increase demand for basic commodities. Motilal Oswal Research found that 57% of the companies in its universe either met or surpassed profit projections, indicating a reasonable distribution of earnings across industries.