There was increased concern among investors as soon as the market opened in the morning. According to available information, Indian stock markets are still near record levels, but the sharp fall of the rupee and increased volatility in international markets have destabilized the environment. Let us tell you that the fast trading of AI sector at the global level suddenly turned into recession on Thursday, the direct impact of which is visible on the Asian markets as well.
According to market expert Ajay Bagga, the rupee falling below the level of 89 is a very important sign, because this is considered a psychological level and it is generally expected that RBI will intervene at this level. It is noteworthy that this fall of rupee could be related to heavy selling by FPIs or unwinding of carry trade due to rising inflation in Japan. Experts say that if Japan increases rates in December, many foreign investors may change their positions, which will impact emerging markets like India.
Along with weak rupee, FPI taxation and unstable global situation are reducing the interest of foreign investors. Bagga believes that after this sharp fall of the rupee, the chances of RBI cutting interest rates in December have become very less, because doing so can put further pressure on the rupee. He also warned that if the currency remains weak, imported inflation may increase, the direct impact of which reaches the common consumers.
Meanwhile, all eyes are on the US-India trade agreement. Bagga says that if an agreement is reached on the pending issues between the two countries, then a strong rally can be seen in the Indian markets. Let us tell you that India has reduced the purchase of Russian oil, yet it is facing 25% duty, which has increased additional pressure on exporters. He also said that due to late decisions, many Indian industries have not been able to take full advantage of the Christmas season this time.
Bagga stressed that India needs fiscal stimulus at this time and RBI will have to cut interest rates going forward. He says that many sectors which create wealth in the country are struggling with excessive tax burden. Private sector banks are still in a strong position and Bagga sees them as a big market opportunity, but he also said that the boom will come only when corporate investment becomes active again.
In the current environment, experts are of the opinion that the market will continue to face ups and downs and investors should remain cautious. Macroeconomic indicators and global decisions will determine the direction of the times to come, it is being said that caution is needed in the market at the moment and the situation should be closely monitored, that is why investors are assessing the situation wisely.
