Indian Equity Markets Suffer Weekly Losses Amid Crude Oil Price Hikes and Tightening Global Monetary Policy

Strategic Insights -

Indian equity markets logged their first weekly losses in a month due to elevated crude oil prices, concerns over global monetary policy tightening, and relentless sales of domestic stocks by foreign portfolio investors (FPIs). The BSE Sensex and the Nifty50 recorded losses of 2.6 per cent and 2.3 per cent, respectively, as foreign investors dumped Rs 13,888 crore worth of stocks in June, raising concerns over the market's resilience.

Key Takeaways:

  • The week's losses were largely attributed to the Reserve Bank of India's (RBI) 50-basis-point rate hike and the central bank's indication of tighter financial conditions going forward amidst rising domestic inflation.
  • Foreign portfolio investors (FPIs) continued to sell domestic stocks, netting out Rs 13,888 crore in June, further pressuring Indian equities.
  • The Nifty Bank index dropped 2.2 per cent, while the IT index slumped 2.6 per cent, and metals lost 2.4 per cent on the index due to foreign investors' reduced risk appetite and expectations of higher interest rates.
  • Broader markets, on the other hand, were less affected, with the BSE Midcap and Smallcap indexes shedding 1.2 per cent and 2 per cent, respectively.
  • Weakness in the rupee against the dollar, hitting a fresh all-time low of 77.8750/$1, further contributed to equities' losses.
  • Gaurang Somaiya, Forex & Bullion Analyst at Motilal Oswal Financial Services, noted that the rupee has been resilient despite volatility in domestic and global equities and strength in the dollar against major crosses.

Statistics:

  • BSE Sensex losses: 2.6%
  • BSE Nifty50 losses: 2.3%
  • Foreign investors' net sales: Rs 13,888 crore
  • Total FII outflows since October 2021: Rs 2.2 lakh crore
  • Crude oil prices (Brent barrel): around $122
  • India's crude oil basket price: 10-year high

Sources:

  • Deepak Jasani, Head of Research - Retail, HDFC Securities
  • Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services
  • Yesha Shah, Head of Equity Research, Samco Securities
  • Reserve Bank of India (RBI)
  • Central Statistics Office (CSO)
  • US Federal Reserve
  • National Stock Depository Limited (NSDL)
  • Bloomberg
  • Reuters