Even as the Indian rupee has fallen to the lowest-ever level of 77.52 against the US dollar during its early trade on Monday, equity investors may face its heat on their portfolios, and gold prices might see a jump. Analysts said the rupee depreciation may persuade FPIs to continue selling equities here, while it may raise gold prices in India.
The Indian rupee on Monday fell to a record low of 77.52 against the US dollar during the trade. Strong US jobs data and prospects of aggressive US Fed rate hikes raised the dollar. “The rupee has fallen due to persistent foreign fund outflows, surging crude oil prices, and general dollar strength,” Mehta Equities Vice-President (Commodities) Rahul Kalantri.
BSE benchmark Sensex on Monday was trading lower by 367.39 points at 54,468.19 points, while the NSE Nifty was down 110.1 points to trade at 16.301.15 points.
Investors have been already witnessing a fall in their equity portfolio due to foreign fund outflows and mixed corporate earnings. The surprise interest rate hike by the Reserve Bank of India (RBI) also pulled down the market on Friday.
Kalantri said, “Equity markets don’t like rising USD-INR and always go the opposite direction to the USD-INR. Meanwhile, the rupee weakness gives strength to domestic gold and silver but the rising dollar is also unfavourable for international gold.”
Kalantri added that the dollar index has been fluctuating around 103 in the past few days and hit the 20-year high as investors continue to bet on further monetary tightening by US Federal Reserve to bring 40-year-high inflation under control.
The US Federal Reserve last week increased its benchmark lending rate by 50 basis points, the sharpest increase in over two decades. The hike in the Fed’s key rate raised it to a range of 0.75 per cent to 1 per cent, the highest point since the pandemic struck two years ago. The half-point surge, the most aggressive since 2000, suggested that further large rate hikes are likely to come.
On few sectors that can benefit from the rupee fall, V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, “The rupee depreciation is good for export sectors, particularly IT (information technology) companies. Pharmaceutical exporters, speciality chemicals and textiles will also gain.”
So, export-oriented sector stocks such as IT, pharmaceuticals, specialty chemicals and textiles can be better bets during the rupee fall; while sectors such as fast-moving consumer goods (FMCG), metal and banking, among others, are at the receiving end.
Vijayakumar added that safe-haven buying of the US dollar has pushed the dollar index to 104, impacting other currencies, particularly currencies of emerging markets with high current account deficits.
“Since gold is valued in dollar, dollar appreciation depresses the price of gold. But, Indian gold prices will rise due to costlier imports caused by the rupee depreciation,” he said.
Foreign portfolio investors (FPIs) have pulled over Rs 6,400 crore from the Indian equity market in the first four trading sessions of the ongoing month when the Reserve Bank of India (RBI) and US Federal Reserve raised interest rates.
Kotak Securities Head (Equity Research-Retail) Shrikant Chouhan said that given the headwinds in terms of elevated crude prices, inflation, tight monetary policy among others, FPIs’ flows in India are expected to remain volatile in the near term.
Read all the Latest Business News here
Comments
0 comment