Rupee Gazing At 70/$; Sound Macro Fundamentals To Help Ride Out Turbulence.

The volatility may be induced with escalation in the global trade war rhetoric. The continuation of consolidation in the markets cannot be ruled out. The progress of monsoon, movement of currency and crude oil prices, and the start of the next earnings season will set the tone of the market going forward.

The duel between the bulls and bears on Dalal Street over the last fortnight has been as volatile and intense as any high pressure game in the ongoing FIFA world cup. The rupee hit an all-time low last month, breaching the 69/$ mark. A confluence of the Fed’s tightening cycle, rising US bond yields, climbing oil prices and revived dollar strength led to a challenging environment for the rupee. However, relatively better macro fundamentals, as compared to the previous major downfall in 2013, should help it ride out this turbulence.

On the global front, most of the major indices traded in the red over the past couple of weeks. Dow Jones slipped 1.59 per cent, whereas S&P 500 and Nasdaq slid 1.30 per cent and 2.05 per cent, respectively. In the European markets, UK’s FTSE100 came down 0.74 per cent, Germany’s DAX and France’s CAC40 decreased 3.46 per cent and 2.12 per cent, respectively. Among Asian markets, Hang Seng was down 1.78 per cent during the fortnight, whereas Nikkei delivered negative returns of over 2.1 per cent in the same period. China’s Shanghai exchange, with a fall of 4.54 per cent, was the worst performing index. 

On the domestic front, bearish equity sentiments prevailed in the Indian markets. Sensex remained flat at 0.06 per cent on the lower side and Nifty descended 0.50 per cent. All the sectoral indices, except IT, traded in the red. The Small-cap and Mid-cap indices slipped 4.17 per cent and 3.04 per cent, respectively, in the two-week period. The Realty index led the downfall in the domestic markets with a loss of 4.84 per cent, followed by the Power index, which fell 4.02 per cent. The FMCG index remained flat, whereas the IT index gained 2.71 in the fortnight. The Auto index decreased 3.62 per cent, whereas the Bank index slipped 0.76 per cent. 

The FIIs have been net sellers, having sold stocks to the tune of Rs. 5,365.16 crore; whereas the DIIs have been net buyers, having lapped up equities worth Rs 6,838.27 crore.

The Brent crude oil price was trading around $78/barrel after rising again to $79/barrel mark in the fortnight. In the near term, the deployment of spare capacity by Saudi Arabia, Iraq, UAE, Russia and the involuntary disruptions in Libya, Venezuela and Iran will drive the crude prices. 

The gold prices maintained its downward trend on the back of subdued demand from the traders amid weak global cues. Silver also fell due to heavy speculative selling, coupled with lack of demand from industrial users.