MUMBAI: The pain may be far from over. The double-digit inflation data which rattled investors, could just be the trigger to send the market tumbling even further. And this horror movie could have many scenes left. The full force of oil prices, farm loan waiver, fertiliser bill and pay commission is yet to be felt.
On Friday, 11% inflation unnerved the stock market, and pushed key indices like the Sensex and Nifty to their lows of 2008. Analysts feel that with global crude oil and commodity prices ruling high and no major correction expected in the near future, inflation continues to cast shadows on the market.
“Today, the policy options before the government are limited. And, for the market, there may be more pain left. There is still no valuation comfort for Sensex stocks,” said Brics Securities head of equities Anand Tandon. If a phase of high inflation and high interest rate continues, a slowdown in GDP would no longer remain an academic debate, according to analysts.
Jolted by the shock news on inflation, Sensex tumbled 517 points, or 3.4%, to close at 14,571 points, while the broad-based Nifty slipped 157 points, or 3.5%, to end at 4,348 points. With this, the two indices have touched their 10-month lows.
Investor wealth eroded by Rs 1.6 lakh crore on Friday, bringing total wealth erosion since January to Rs 26.6 lakh crore. Since January, foreign institutional investors (FIIs) have sold heavily, pulling out a total of Rs 24,000 crore. At 5%, BSE’s oil and gas index was the worst-hit sectoral index, followed by real estate and metal indices, which fell 4.5% and 4% respectively.
Rate-sensitive sectors like real estate and banking also took a beating on fears of possible monetary tightening by RBI. The inflation data spooked many analysts who were expecting a more modest 10%. It is felt that RBI may go for another hike in interest rates and cash reserve ratio to bring down inflation.
“Government finances have gone haywire because of soaring crude oil prices, forcing the Centre to hike fuel prices. The government appears concerned about the rising inflation and may take some measures to check it. Interest rates may go up, which in turn, will put pressure on corporate earnings,” said KR Choksey Shares and Securities chairman Kisan Choksey.
Some brokers feel that the market is worried about a possible earnings slowdown and next year’s general elections. One has to see how the UPA government tackles various sensitive issues, particularly inflation, which will be key to its electoral performance, said a broker.
On Friday, 11% inflation unnerved the stock market, and pushed key indices like the Sensex and Nifty to their lows of 2008. Analysts feel that with global crude oil and commodity prices ruling high and no major correction expected in the near future, inflation continues to cast shadows on the market.
“Today, the policy options before the government are limited. And, for the market, there may be more pain left. There is still no valuation comfort for Sensex stocks,” said Brics Securities head of equities Anand Tandon. If a phase of high inflation and high interest rate continues, a slowdown in GDP would no longer remain an academic debate, according to analysts.
Jolted by the shock news on inflation, Sensex tumbled 517 points, or 3.4%, to close at 14,571 points, while the broad-based Nifty slipped 157 points, or 3.5%, to end at 4,348 points. With this, the two indices have touched their 10-month lows.
Investor wealth eroded by Rs 1.6 lakh crore on Friday, bringing total wealth erosion since January to Rs 26.6 lakh crore. Since January, foreign institutional investors (FIIs) have sold heavily, pulling out a total of Rs 24,000 crore. At 5%, BSE’s oil and gas index was the worst-hit sectoral index, followed by real estate and metal indices, which fell 4.5% and 4% respectively.
Rate-sensitive sectors like real estate and banking also took a beating on fears of possible monetary tightening by RBI. The inflation data spooked many analysts who were expecting a more modest 10%. It is felt that RBI may go for another hike in interest rates and cash reserve ratio to bring down inflation.
“Government finances have gone haywire because of soaring crude oil prices, forcing the Centre to hike fuel prices. The government appears concerned about the rising inflation and may take some measures to check it. Interest rates may go up, which in turn, will put pressure on corporate earnings,” said KR Choksey Shares and Securities chairman Kisan Choksey.
Some brokers feel that the market is worried about a possible earnings slowdown and next year’s general elections. One has to see how the UPA government tackles various sensitive issues, particularly inflation, which will be key to its electoral performance, said a broker.
No comments:
Post a Comment