Indian stock market continues to rise for the fourth consecutive day

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New Delhi: Indian stocks rose again in early trade on Tuesday after a sharp fall in four consecutive sessions, possibly due to price buying.

At 9.32 am, the Sensex was trading 483.27 points or 0.85 per cent higher at 57,628.49, while the Nifty was trading 155.00 points or 0.91 per cent higher at 17,171.30.

Meanwhile, 45 of the Nifty 50 companies traded in the green this morning, data from the National Stock Exchange showed.

Sensex and Nifty fall

Major indices of the Indian stock market, Sensex and Nifty, fell nearly two per cent on Monday dragged by broad-based sell-tracking weakness in global equities, which tightened aggressive monetary policy by various central banks, including the US Federal Reserve. ,

The latest policy rate hike by the US central bank in its fight against high inflation has dampened investor sentiment.

The latest fall in the Indian stock markets reversed the positive sentiment in the domestic market which continued for two months.

The US Federal Reserve has lowered the repo rate by 75 bp. magnified

Further tightening of monetary policy in the US inevitably means that investors will tend to move to US markets for better and stable returns. The US Federal Reserve had hiked the repo rate by 75 basis points – the third consecutive hike of the same magnitude in line with expectations.

The Fed also indicated that more rate hikes are coming and that these rates will remain high until 2024.

The US central bank wants to achieve maximum employment and inflation at 2 percent over the long term and anticipates that an ongoing increase in the target range would be justified. Raising interest rates is a monetary policy instrument that generally helps to suppress demand in the economy, thereby helping to lower the inflation rate.

RBI Monetary Policy Committee meeting

Going forward, the Monetary Policy Committee meeting of RBI during September 28-30 will be closely watched by the stakeholders. Foreign reserves, which have fallen significantly and are at a two-year low from their peak, will also keep the markets on the edge.

The reserves have fallen by nearly USD 80 billion since Russia-Ukraine tensions escalated earlier this year.

Indian forex reserves have been depleting continuously for the past few months as the Reserve Bank of India is likely to intervene in the market to protect the rupee depreciation and trade settlement of the country.

Here’s how RBI intervenes in the market

Usually, to prevent a sharp fall in the rupee, the RBI intervenes in the market through liquidity management, including selling the dollar. A depreciating rupee usually makes imported goods costlier.

“FPIs are becoming big sellers in India (Rs 5101 cr in cash market yesterday) indicating risk-off in equities in emerging markets. In the context of rising US bond yields, the RBI will be forced to hike rates by about 50 bp on September 30. This will be another downside for the equity markets,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.

“In short, there is no positive trigger for the equity market now other than a fall in crude. This is not the time to buy dips aggressively. However, there is scope for selective buying in the broader market. Stocks are climbing even in this weak market. These are signs of accumulation on strong fundamentals,” Vijayakumar said.

Rupee at all-time low

Talking about the depreciation of the rupee, it is currently hovering around the low of its life. This continued depreciation follows the continued consolidation of the US dollar index to a two-decade high, on hopes that demand for a safe-haven currency like the dollar will increase.

The rupee opened at 81.49 against the US dollar this morning, as against the close of 81.62 on Monday.



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