Market outlook. Sensex, Nifty to fall at open amid focus on rupee, RBI meet

Domestic markets are expected to open weak on Wednesday, amid weak global cues and falling rupee. Equities across the globe have slipped ahead of key central bankers meet. In India, all eyes are on RBI, which will pronounce its rate stance today. Most analysts expects a 35 basis points increase in rate.

Lakshmi Iyer, CEO- Investment Advisory, Kotak Investment Advisors Limited,said: “MPC decision making seems to be getting challenging each time they meet. However, this time thankfully the US Fed’s indicating it’s intent to reduce the pace of rate hikes, India’s GDP numbers seem to be hitting a soft patch as well as inflation in most Asian nations as also US seems to be plateauing out augurs well for rates. We expect a 35 bps rate hike in the upcoming monetary policy.”

Rupee fall

However, any adverse outlook for Indian economy or sharp increase could add pressure on equities.

Besides RBI call on rate, focus will be on rupee movement. According to experts, the sudden fall in rupee in the last two ways could temper the flow of foreign portfolio invetors.

Rupee spot closed at 82.62, down 81 paise, highest levels since November 4, on the back of unwinding of carry trades and corporate dollar demand. Once the spot crossed 82, stops may have been triggered by importers and bank dealers and that accentuated the fall, said Anindya Banerjee of Kota Securities.

“USDINR forward premium is trading at the lowest levels since 2011 and low forward premiums are hurting dollar supply. It is making carry trade unviable and also reducing exporter hedging. At the same time, it is making Rupee vulnerable to global shocks,” he added.

SGX Nifty at 18,737 signals weak opening for Nifty futures, which on TUesday closed at 18,771. Equities across Asia-Pacific region are down between 0.1 per cent and 0.75 per cent, in early deals on Wednesday.

Prashanth Tapse - Research Analyst, Senior VP (Research), Mehta Equities Ltd, said: “Markets traded in red as bears took over the negative baton from overnight weak Wall Street finish due to the negative shift to hawkish Fed tightening view. Investors also preferred to stay on the sidelines ahead of the RBI MPC Meeting interest rate decision on Wednesday.”

World Bank’s GDP forecast

Howerver, India’s underlying strength is likely to keep Indian stocks firm and on consolidation said analysts.

The World Bank on Tuesday raised India’s GDP growth forecast for the current financial year to 6.9 per cent from its October estimate of 6.5 per cent citing the economy’s resilience in the face of challenging external environment and the September quarter performance.

However, World Bank has lowered its India growth forecast for next fiscal to 6.6 per cent from 7 per cent made earlier.