Sensex, Nifty to open weak amid negative global markets

KS Badri Narayanan Chennai | Updated on October 12, 2021

Institutions turn sellers; Focus on rupee

Domestic stock markets are expected open on negative note, amidst weak global cues. With a lack of institutional buying support, Indian markets may see a meaningful correction, said analysts. Falling rupee also is a cause for concern, they added.

SGX Nifty at 17,870 indicates a 100-point gap down opening for Nifty futures, on Monday closed at 17,973 on the NSE. Asia-Pacific markets are down in the rage between 0.2 per cent and 1.3 per cent. Overnight US stocks too slipped by about 0.7 per cent.

Funds outflow

Investors withdrew money from exchange-traded funds that buy emerging market stocks and bonds last week, said a Bloomberg report. This was the third straight week of outflows. Outflows from US-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totalled $1.12 billion in the week ended October 8, compared with losses of $260.6 million in the previous week, according to data compiled by Bloomberg.

Rupee below 75

The rupee breached the 75 level to close 37 paise lower against the dollar at 75.36 on Monday due to high crude prices. The increased prices of the greenback and oil triggered inflation fears, pushing up yields on the 10-year government bond to as much as 6.34 per cent — the highest in 18 months.

Foreign portfolio investors sold shares worth ₹ 1,311 crore in cash segment and domestic investors offloaded Rs 373 crore shares. India VIX was up by 2.78 per cent from 15.65 to 16.08 levels.

“The movement in rupee is mainly driven by the uptrend in crude and DXY. Some cooling off in crude prices and sell side RBI intervention may limit the trend in USDINR spot. But worries about US inflation are still alive and any upswing in US CPI this week, will boost expectations of an earlier FOMC rate hike next year after tapering, keeping the USDINR spot afloat," said Emkay Global in a note.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, Given the sharp rally in markets, valuations have turned expensive and demand consistent earnings delivery v/s expectations. Rising energy and commodity prices, disruptions in global supply chains, US Fed taper talks and US government debt ceiling are some of the factors which can also led to higher global market volatility.

"In this environment of global uncertainty as well as elevated valuations, we expect stock/sector specific action to continue," he added.

Published on October 12, 2021

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