New Delhi
Investor sentiment remains subdued due to the high volatility of the global currency market, leading to a high depreciation of EM currencies, which affects the performance of equities, says Vinod Nair, Head of Research.
Indian indices encountered a week of vulnerability due to adverse global and domestic cues, accompanied by a shift towards safer assets by investors like the US dollar.
Discouraging domestic industrial production, negative wholesale inflation, and elevated CPI inflation contributed to market volatility, he said.
Additional strains emerged from stronger-than-expected US retail sales data; adding to Fed rate hike fears, concerns about US bank rating downgrades, and a sudden Chinese central bank rate cut hindered recovery and sustained selling pressure, he added.
Escalating US bond yields are predicted to restrict foreign investments in India, further impacting market dynamics. With moderate core inflation & transitory July retail CPI data, the market did not foresee a rate hike. The metal sector bore the brunt this week due to sluggish industrial data and concerns about Chinese demand.
Elevated Indian inflation figures might impact expected rate cuts or lead to hikes. Sectors like Metal & Mining, Larger Auto players like Hero Moto and Tech companies contributed to the fall. The ongoing correction could extend through September, with Q2 results possibly sparking a new bullish phase in October, he said.
However, action is likely to continue in the broader market along with sectorial rotation. Index heavyweight Reliance would be in focus as Jio financial services is set to be listed on Monday, he added.
