The Indian stock market saw the Nifty50 take a breather last week after seven weeks of gains. With the rupee continuing to decline against the dollar, investors have been worried about the Indian markets sustaining their strong rally.
Despite this, the Nifty50 still ended last week slightly higher, up 0.72%, after having gained 5.53% in the previous week. The breadth of the market was also positive, with significantly more advancing issues than declining ones.
However, the caution in the markets was driven by the appreciation of the dollar against the rupee and expectations of further monetary policy tightening by the US Federal Reserve. The rupee has fallen by almost 4% against the dollar in the past six weeks and is now trading near its four-month low.
The decline in the rupee is a result of rising crude oil prices and growing demand for the dollar in the broader global markets. Higher crude prices add to the inflationary pressure in India, which could prompt the country’s central bank to hike interest rates.
Meanwhile, Indian markets are set to continue to be influenced by global cues. Signs of trade tensions between the US and China and the geopolitical situation in the Middle East will remain key factors. It will also be interesting to see how investors react to the expected fiscal stimulus from the government to revive the slowing Indian economy.
In addition, the outcome of the Federal Reserve’s monetary policy meet at the end of the month is another factor to look out for. The US Federal Reserve is expected to increase interest rates, which could lead to further pressure on the rupee and other emerging market currencies.
Going forward, investors should remain cautious in the near-term and look for opportunities to invest in quality stocks on dips. It would be wise to avoid stocks with high valuations or companies with heavy debt. Investors should also keep an eye on the direction of the rupee as it will have a significant impact on the stock markets in India.
Overall, with plenty of uncertainties on the global and domestic front, the Nifty50 is likely to see some further volatility in the near-term. However, investors should not forget the long-term potential that Indian markets offer, given the country’s strong economic growth potential. Therefore, it is important for investors to remain focused on their investment objectives and not get swayed by news and market movements.
