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Markets volatile as US Fed meets, fears of more bank failures

The BSE Sensex fell almost 900 points and the NSE Nifty fell 270 points during intraday sessions, causing equity markets to experience a significant correction of up to 1.5%. Despite Sensex and Nifty making respectable recoveries from their day’s lows of 544 points and 160 points, respectively, they closed down 0.62% and 0.65%.

Despite continuous efforts to save First Republic Bank and Credit Suisse, international investors remained on edge due to warnings of a potential banking crisis.

Despite Swiss authorities’ action to safeguard the global financial system, according to Vinod Nair, head of research at Geojit Financial Services, there are still a number of challenges facing global markets, and investor mood is still unstable.

Prior to the US Federal Reserve’s announcement on an interest rate hike later on Wednesday, investor concerns and uncertainty are growing.

The rupee remains under pressure as FPI selling persists in the context of the general risk-off mood.

Metal and commodities stocks were the main culprits for the day’s equities selling, with notable declines also seen in the banking, IT, real estate, and auto sectors indices. The majority of sectoral indices ended in the negative. The performance of broader indices was poor, and they all fell by around a percentage point.

Heavyweights like Reliance Industries and the Adani Group all experienced losses of up to 5%, and their stock prices also hit 52-week lows. 2,180 were traded during intraday. Nifty 50 stocks decreased in four out of five cases.

“The pessimistic atmosphere prevalent in global markets caused a significant sell-off in the domestic market as investors struggled with unfavorable news ranging from upheaval in major global banks to macro-economic concerns and decreasing commodity prices,” said Shrikant Chauhan, Head of Shrikant Chauhan. Equity Research (Retail) at Kotak Securities Ltd.

A more aggressive rate hike could cause greater problems for the equity markets, therefore traders are also cutting back on their equities wagers before the Fed meeting.

Experts are predicting no increase for a 25-basis-point increase due to the US banking crisis.

Yet, other industry professionals believe that even a 25 basis point increase might be detrimental to the markets.

Investors are concerned that banks are collapsing under the weight of unanticipatedly high rate increases over the past year to stifle inflation and economic activity, and that the banking upheaval could trigger a recession if it affects credit. Deepak Jasani, head of retail research at HDFC Securities, claimed that the product fills the gap.

The rupee, which continued to fall last week as a result of stock market selling and a rising dollar index, fell by 9 paisas to 82.64 against the US dollar on Monday. FII selling, according to Jatin Trivedi, VP Research Analyst, LKP Securities, kept the rupee weak following a good opening on the strength of the dollar. As markets wait for the Fed’s conclusion, the rupee will continue to fluctuate. Until then, Trivedi anticipates that the rupee will trade between 82.35 and 82.75.

Additionally, analysts think FPIs are unlikely to become buyers in the near future due to worries about bank failure and contagion in the US as well as the present risk-off mood following the Fed’s decision.

The decline in crude oil prices is good news for Indian markets. A level not seen in more than a year, Brent is now trading below $71 a barrel. The country, which imports the majority of its domestic oil needs, benefits from the decline in crude oil prices.

According to experts, the markets will continue to follow global cues and changes in the US and European banking systems in the days to come. While Credit Suisse has agreed to be acquired by UBS for $3.2 billion in order to stop additional market disruption in the global banking sector, bondholders of Credit Suisse’s AT1 notes worth $17.2 billion would be affected, according to research. the CEO of Reliance Securities, Mitul Shah, stated.

Experts say that the focus of investors should be on risk management.

Also Read: How to invest in the stock market? Must Read


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