Greenback Exerting Pressure From All Quarters
GREENBACK EXERTING PRESSURE FROM ALL QUARTERS
Stock markets in India started the week on a strong clip as key benchmark indices continued to scale record highs and trade with strength. Positive global developments coupled with stability in both the currency as well as crude oil prices at the beginning of the week gave investors enough reasons to participate in the equity markets. However, as the US-Sino trade war concerns continue to loom over the markets, investors decided to take some money off the table and book profits towards the
end of the week. Additionally, weakness in the INR further dampened investor sentiment and renewed inflation and trade deficit concerns.
Global sentiment got a boost after US Federal Reserve Chairman Jerome Powell said that gradual rate hikes are now expected and China's central bank decided to lift its official yuan midpoint by more than what the street expected. Investors also turned positive after the United States and Mexico reached a trade agreement. Notwithstanding these developments, the uncertainty over trade-war implications capped gains and held investor sentiment in check. Additionally, media reports
towards the end of the week indicating that US President Trump has stepped up his trade talks made investors wary and put pressure on stocks.
Towards the end of the week, the Indian Rupee fell against the US dollar to trade at a lifetime low of 71. The weakness in the rupee can largely be attributed to month-end dollar demand from importers. A sharp rise in the crude oil prices in the international market and weakness in the emerging markets currencies also pressurized the rupee. Oil prices inched higher towards the end of the week on a fall in U.S. crude inventories and expected disruptions to supply from Iran and Venezuela. Besides the robust month-end demand for the American currency from oil importers, expectations of rising interest rates amid lingering Sino-US trade tensions also weighed on the Indian Rupee.
Institutional activity during the week has been fairly divergent. Foreign institutional investors (FIIs) started the week on a tepid note, showing no clear bias. However, selling pressure from FIIs intensified towards the end of the week. Domestic institutional investors, on the other hand, have been strong buyers of Indian equities, this past week. FIIs have net sold Indian equities worth INR 366.39 crore, since 27th August, 2018. DII have net bought Indian equities worth INR 433.65 crore, in the same time period. For the month of August 2018, FIIs have net sold Indian equities worth INR 2015.72 crore while DIIs have net bought Indian equities worth INR 2650.80 crore.
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