Benchmark equity indices Sensex and Nifty on Tuesday plunged around 1 percent on selling across counters and the Indian rupee hit new record low as caution set in among investors ahead of the RBI MPC meet outcome.Indian stocks and the rupee have been fighting volatility for a while now as concerns remained over stubbornly high inflation, with analysts and economists expecting the Reserve Bank of India to follow up its unscheduled rate hike in May with another increase of up to 50 bps at the policy meeting on Wednesday.
The BSE gauge Sensex settled 567.98 points or 1.02 percent lower at 55,107.34; and the NSE Nifty ended 153.20 points or 0.92 percent down at 16,416.35. This was the third straight session of loss for the indices.
The losses on the various indices were triggered mainly by banks, autos and pharma stocks — falling more than 1 percent each. Consumer stocks extended losses for a third straight session, shedding over 1.5 percent to a near two-week low.
Elsewhere in Asia, bourses closed mixed, with China and Japan logging marginal gains. Rest of the Asian market ended with losses. U.S. equities ended marginally higher yesterday with S&P 500 increasing by 0.3 percent, ending the session towards the low point of the day. The Dow Jones was up 0.1 percent, while tech-heavy Nasdaq rose.
“The main focus for the next week would be on the Reserve Bank of India’s interest rate decision on June 8. The Indian equities will likely see another tumultuous week as the central bank would take its strict stance in an attempt to curb inflationary pressures. RBI is looking at another phase of coordinated action between fiscal and monetary authorities. And all eyes are on RBI and the US Fed in which further rate hike is expected. The primary focus will be on central banks’ policy measures to stabilize inflation,” said Mitul Shah, Head Of Research at Reliance Securities.
Here are some of the key highlights from the financial markets:
Rupee hits new life-time low:
The Indian rupee plunged to a new life-time low of 77.77 against the US dollar, falling 11 paise over its previous close. The domestic currency has been under tremendous pressure for the last 4-5 weeks amid soaring crude oil prices and sustained selling by foreign investors in the Indian capital market.
Crude oil softens slightly:
Oil prices were stable on Tuesday as the market balanced risk sentiment with supply concerns and the prospect of higher demand as China relaxes its COVID curbs.
Brent crude futures were down 38 cents, or 0.3 percent, at USD 119.13 barrel. US West Texas Intermediate (WTI) crude futures were down 25 cents, or 0.2 percent, at USD 118.25 a barrel, having risen by over USD 1 per barrel earlier in the session.
Global shares weaken as central banks continued their fight against inflation:
World shares fell on Tuesday and bond yields remained supported as a surprise 50-basis-point rate increase in Australia raised concern over policy tightening ahead of US inflation data and a European Central Bank meeting this week.
The Reserve Bank of Australia (RBA) raised rates by the most in 22 years and flagged more tightening to come as it battles to restrain surging inflation, driving a brief spike in the Aussie and hitting local shares.
The MSCI’s benchmark for global stocks fell 0.3% to 650 points, weighed down by morning losses in Europe and earlier weakness across Asian markets.
The pan-European STOXX 600 equity benchmark index fell 0.4 percent, while S&P 500 e-mini futures fell 0.4 percent.
US dollar spiked to a 2-week high:
The US dollar rose to a two-week high as rising US Treasury yields supported the greenback, pushing the Japanese yen to its lowest level against the dollar in two decades.
The yen dropped to a 20-year low of 133 per dollar, levels that had previously been highlighted as intervention territory, a day after central bank governor Haruhiko Kuroda reiterated an unwavering commitment to “powerful” monetary stimulus.
Benchmark 10-year Treasury yields had climbed as high as 3.064 percent in Tokyo trading for the first time in almost four weeks, before slipping back to 3.0307 percent. Spreads between 10-year US and Japanese debt held at 278 bps, not far from a 3-1/2 year high of 292 bps hit last month.
Bullion prices in check:
Internationally, gold prices held near one-week lows on Tuesday as investors wagered that aggressive tightening plans by major central banks would keep interest rates elevated for an extended period, boosting US Treasury yields and in turn the dollar.
Spot gold was little changed at USD 1,842.46 per ounce, trading in a tight range.
Earlier in the session, bullion touched USD 1,836.10, its lowest since June 1. US gold futures were steady at USD 1,844.90.
