Report by- Sabyasachi Bhattacharya
Record low for Rupee as it tumbles to Rs 74/$-
The Indian rupee crossed 74 mark for the first time after Reserve Bank of India (RBI) kept the key rates unchanged. The central bank in its Monetary Policy Committee (MPC) meeting has kept the repo rate unchanged at 6.50 percent but changed the stance from Neutral to Calibrated Tightening. Rupee slipped to a record low 74.22 per dollar, down 64 paise from previous close 72.58 per dollar. It opened marginally lower in the early trade. Surge in global crude oil prices and weakness in the rupee could push the officials to raise rates. Market participants will also be looking forward to taking cues on how the central bank looks to tackle the liquidity issue. The following reasons contribute to the weakness of Rupee in the currency markets-
- Strength in the dollar and surge in global crude oil prices contribute to weakness in the currency.
- On the domestic front, market participants will be keeping an eye on RBI policy statement and expectation is that the central bank could raise rates by 25bps.
- Bulls are at bay as focus is on whether central bank raises its inflation forecast for the latter half of the year.
Policy Updates by RBI, Let’s take a look at the key insights –
RBI officials met late afternoon today to discuss key changes in the existing policies. Amidst the weakening of Rupee and liquidity tensions, the six member Monetary Policy Committee made a few important changes in the existing policy system. Let’s take a quick look at those changes-
- In an unexpected move, the monetary policy committee (MPC) of Reserve Bank of India (RBI) maintained status quo on key rates, with repo rate unchanged at 6.5%. This pause comes after two consecutive rates hikes in June and August.
- Despite the increase in crude prices and tightening of global financial conditions, the inflation is projected at 3.9-4.5% for the rest of the year and fits within RBI’s target of 4% for consumer price index (CPI) inflation, which could be one of the reasons for holding the rates.
- Though RBI has maintained its stance, some major banks have revised their lending rates, and more may follow. In such a scenario, your best plan is to try and prepay your loans in part or full. Even a small change in interest rates can have significant impact on your loans, especially in case of long-term loans like home loans, and even a small prepayment can help in a big way. For instance, if you have a loan of Rs.40L for 20 years at 8.75, your total payable amount would be Rs.84.8L. At the end of three years, your outstanding balance is Rs.37.5L. Assume you repay roughly 10% or Rs.3.5L, your outstanding amount comes down to Rs.33.86L. Even with a 25pbs hike in interest rate, your total outflow would be lower.
- Retains GDP growth estimate at 7.4 pc for current fiscal
- Global economic activity becoming uneven, outlook clouded by uncertainties. Excise cut in petrol and diesel will moderate retail inflation.
Source-FirstPost, Purple Trades Research Department
Different day, same story on Dalal Street as bears tighten their grip on the market –
Chart source- Upstox
No signs of bulls yet as market tumbles for the 6th time in 7 days. Things are not cooling off as of now as major Indices plunged heavily amidst global tensions. As you can see in the chart above Nifty had a Gap-Down opening today as well. From there on the market only went downstairs. The Orange Line shows that the market has been down from yesterday and is making lower lows and lower highs. The Purple Line shows how the market went down today as each session was dominated by the bears today. About three shares declined for every share rising on the BSE. There was heavy selling during the final hour of the day which pressurized the index to close below the 10,300 mark. These are not good signs for the health of the economy. Sensex tumbled
- Rupee breached a fresh new low of Rs 74.22/$ which pressurized the indices to move downwards.
- Higher US yields are anything but favorable for emerging markets. This is pressuring local currencies badly.
- Gold prices up by 141, which is not a good sign for the market as gold is considered a safe investment. This shows that investors are taking their money out of the market and moving on to safer investment options.
- US-Iran trade war, weakening of local currencies are pressurizing the Asian Markets as Japanese Stock Index “NIKKEI” has been underperforming as well.
- Nifty closed below its 200DEMA which was considered as a major support. As Nifty closed below its 200DEMA markets look gloomy.
Source- Purple Trades Research Department
Top sectors that moved the market today- Data source- Moneycontrol
Top Gainers for today- Data source- Moneycontrol
Top losers for today- Data source- Moneycontrol