Wait, ‘not the time to aggressively buy the dips’: Market strategist
Premium- The combination of relentless rise in dollar and the sustained rise in US bond yields has led to a sharp correction in Indian stock markets
After a sharp selloff over four days, Indian stock markets edged higher on Tuesday but remained very volatile with selling pressure seen at higher levels. After rising 500 points in early trade, Sensex gave up most of the gains traded flat. Foreign institutional investors sold a net of ₹5101 crore worth Indian equities on Monday as per provisional data available with the National Stock Exchange.
Stocks have been sagging under concerns over stubbornly hot inflation and the risk that central banks could trigger recessions as they try to cool high prices for everything from food to clothing. Investors have been particularly focusing on the Federal Reserve and its aggressive interest rate hikes. But volatility in currency markets has further roiled markets in recent days.
“The dominant dynamic roiling equity and currency markets globally is the combination of relentless rise in dollar and the sustained rise in US bond yields. So long as this trend continues, equity markets will be under pressure. FPIs turning big sellers in India is an indication of the risk-off in equity in emerging markets. In the context of rising US bond yields, RBI will be forced to raise rates by around 50 bps on September 30th. This will be another negative for equity markets,"said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"In brief, except for falling crude there are no positive triggers for the equity market now. This is not the time to aggressively buy the dips. However, there is scope for selective buying in the broader market. There are stocks rising even in this weak market. These are signals of accumulation on strong fundamentals," he added.
In the previous four sessions, Sensex had fallen over 2,500 points in tandem with a global selloff in equities.
On Friday, the US government will release another report on personal income and spending that will help provide more details on where and how inflation is hurting consumer spending. The US economy is already slowing, raising worries that rate hikes might cause a recession.
“The upcoming RBI MPC meet is expected to offer significant cues to the financial ecosystem in India. In keeping with the 75-bps rate hike by the US Federal Reserve earlier this month, and the rising inflation, which is expected to be around 7% for September as well, we are preparing for a rate hike by the MPC. The dollar’s continued strength, as well as the geopolitical concerns in Europe, will weigh on the MPC while they make this decision, and it is likely that the market will have to contend with a 50-bps hike," Raghvendra Nath, Managing Director – Ladderup Wealth Management Private Limited.
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Among the Sensex stocks, RIL, Kotak Bank, Tata Steel and Maruti were among the top losers.
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