The Indian rupee has hit a record low against the dollar this week on the back of expected US interest rate hikes to curb inflation, while the benchmark NSC Nifty 50 index has fallen more than two per cent.
According to the foreign news agency ‘AFP’, the Indian rupee has reached 78.28 per dollar for the first time as the report that thwarted US inflation forecasts on Friday was due to the Federal Reserve’s tightening of monetary policy.
Rising oil prices, a sharp rise in FEDs and capital outflows in emerging markets have pushed the Indian currency down, as foreign investors are avoiding risk in such a scenario.
Central banks, including the Bank of India, have adopted tougher policies in recent months, with the Reserve Bank last week raising borrowing costs by 50 basis points for the second time in several months.
The RBI had earlier in May announced a 0.4 per cent increase in the out-of-cycle rate.
However, the central bank of India is also selling foreign currency to strengthen or increase the value of its currency.
According to a report by foreign news agency ‘Reuters’, the benchmark 10-year bond yield was trading at 7.59% after rising to 7.61%, which is the highest level since February 28, 2019.
The 10-year bond yield closed at 7.52% on Friday.
The ongoing war has also led to rising inflation in India, which has exceeded the central bank’s target of 2 to 6 per cent from January to April and reached an eight-year high of 7.79 per cent in April which led to an increase in food and fuel prices.
In May, the government banned wheat exports to control prices, whose production has already been severely affected by the heat wave.
Not only that, but sugar exports were restricted to secure supplies while the government reduced duty taxes on fuel and edible oil.
Indian stocks fell 2.5 percent on Monday as US inflation data and Beijing’s Code 19 warning warmed global markets, with Asia’s third-largest economy trading in May consumer price data.
Waiting for The NSE Nifty 50 Index fell 2.5 percent to 15,785 at 0,509 MGT with all components trading lower, having fallen 2.8 percent in the previous session to a four-week low and The S&P BSE Sensex fell 2.6 percent to 52,874.
Sorbh Jain, Assistant Vice President, SMC Global Securities, said that the rise in inflation is real and the recent earnings of US companies show that it has become difficult to cope with this high inflationary pressure, while investors are worried that we are heading for a recession.
However, all eyes are now on India’s retail inflation figures, which will be released later.
A Reuters survey found that the consumer price index fell marginally in May but remained above the Reserve Bank of India’s tolerance level for the fifth consecutive month.
Asian stocks have fallen on fears that the US Federal Reserve will tighten its policy more aggressively as the Consumer Price Index hit a 40-year high last month, according to data released last week.
Investors’ concerns, on the other hand, were heightened when Beijing’s most populous district, Chaoyang, on Sunday announced three phases of large-scale tests to stem the spread of code 19.
With both Infosys Limited and Tata Consultancy Services down 3.3 per cent, IT stocks have pushed the Nifty 50 down, while the Nifty IT index has fallen 3.4 per cent.
Bajaj Finsro and Indus End Bank were the biggest losers on the NSE, with each falling about 5 percent and the NSE Bank Index falling 3.5 percent.