High volatility in the global capital markets and increasing impacts of inflation in major economies continued to shake up Indian stock market as Sensex and Nifty 50 tumbled by 741.87 and 203.55 points in the past week.
Sensex saw its index value decrease by 1.26 percent to close at 58,098.92 while nifty 50 fell 1.16 percent to end trading this week at 17,327.30.
The monetary policy decision by US Federal Reserve to hike interest rates by 75 basis points resulted in negative sentiments across global capital markets. Chairman of the US Federal Reserve, Jerome Powell had earlier said that the central bank would continue pursuing an aggressive policy to bring inflation under the benchmark level of 2%.
Forecasts released by US Federal Reserve regarding future interest rates increased negative sentiments in the stock market. These negative sentiments also affected Indian stock markets.
Sector-wise analysis of the stock market in India suggests that only Fast moving consumer goods sector, automobiles, and healthcare were able to make any small gains. Indices and stocks related to power, real estate, and capital goods fell by 3 to 5 percent.
The strict policy followed by the US Federal Reserve to control inflation in the economy of the United States of America is going to have a long-lasting impact on the growth projections of the world economy.
Foreign institutional investors and Foreign Portfolio Investors will soon start selling their equities and investments in India and park the funds somewhere more safe and secure economically. Interest rate hikes by US Federal Reserve will also make depositing in the United States a more secure and attractive option for wealthy investors.
According to statistics Foreign institutional investors (FIIs) sold equities worth Rs 4,361.77 crore of equities in the week gone by. On the other hand, domestic institutional investors (DIIs) bought equities worth Rs 1137.96 crore.
This phenomenon of FIIs selling equities in Indian capital markets is expected to continue for a few more weeks. The interest rate policy decisions made by the monetary policy committee of the Reserve Bank of India are also going to be very crucial for Indian capital markets in the coming weeks.
The market and investors are expected an interest rate hike by 50 basis points by the Reserve Bank of India. RBI is likely to continue to follow the steps of the US Federal Reserve to avoid more depreciation of the Indian rupee against the US dollar.
The Indian rupee has been performing very badly against the US dollar for the past few months.