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Indian equities nosedive on US Fed’s commentary: 4 factors spooking the market

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3 years ago

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Indian equities nosedive on US Fed’s commentary: 4 factors spooking the market

Domestic stocks came under intense selling pressure on Jan. 27, as comments from Federal Reserve Chairman Jerome Powell spooked investors after the central bank’s monetary policy statement on Jan. 26.

In early morning session on January 27, the Nifty 50 index plummeted 280 points, or 1.6 percent, to 16,997, while the BSE-Sensex was at 57,031, down 1.4 percent or 826 points.

Investors were troubled by Powell’s hawkish comments on the scope of future monetary policy tightening, even as the central bank left its benchmark interest rate unchanged and signaled that a near-term rate hike would be “appropriate.”

Powell said at a news conference after the policy announcement that the upside risks of a strong U.S. labor market and decades of high inflation mean the central bank has plenty of room to raise interest rates in the background while it shrinks its balance sheet.

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“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” Powell said. Market participants interpreted the Fed’s comfort on the economy as a signal that the Fed may raise interest rates. The rate hike has more than quadrupled this year.

Investors widely expect the central bank to raise interest rates four times in 2022 ahead of its Jan. 26 monetary policy meeting. Investment bank Nomura reportedly expects the central bank to raise interest rates by 50 basis points at its upcoming March meeting.

Still, for emerging markets such as India, a faster pace of rate hikes could further accelerate foreign capital outflows from the country. So far, foreign investors have withdrawn nearly Rs. Domestic stocks hit Rs 100 crore since early October.

Pressure from foreign inflows was also weighed down by the rise in the dollar index. The U.S. dollar index rose nearly 1% on Jan. 26 after Jerome Powell’s hawkish statement. A recent report from JPMorgan India showed that the Nifty 50 index was negatively correlated with the US dollar index as carry trades were affected.

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Oppn seeks probe into Adani charges in US: ‘Obvious protection of PM Modi’

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16 hours ago

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November 21, 2024

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Oppn seeks probe into Adani charges in US: ‘Obvious protection of PM Modi’

Following US SEC charges of bribery against Gautam Adani, opposition parties criticise PM Narendra Modi and call for a JPC investigation.

As billionaire Gautam Adani faces charges in the US for alleged bribery and fraud, the Opposition on Thursday intensified its attack on the Centre over its alleged links with the Adani Group.

Gautam Adani has been charged in the US with allegedly paying $250 million in bribes to Indian officials between 2020 and 2024 to secure favourable terms for solar energy contracts. The scheme, prosecutors said, could have earned Adani’s group over $25 billion in profits.

Congress demands JPC probe

Reacting to the charges, the Congress called for a Joint Parliamentary Committee (JPC) probe into alleged scams involving Adani’s conglomerate. The party also demanded the appointment of a “new and credible” Sebi chief to investigate Adani’s financial dealings and compliance with securities laws.

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Congress leader Jairam Ramesh said the US Securities and Exchange Commission’s (SEC) actions highlight the failure of Indian institutions to investigate the group. “The indictment vindicates Congress’s demand since January 2023 for a JPC into the Modani scams,” Ramesh wrote on X.

He accused Prime Minister Narendra Modi of shielding Adani and claimed Congress’s “Hum Adani Ke Hain Kaun” (HAHK) series had exposed the businessman’s alleged fraud and his ties with the PM.

The fact that it has taken a foreign jurisdiction to properly investigate Adani only shows how Indian institutions have been captured by the BJP, and how decades of institutional development have been undone by greedy and power hungry leaders, the Congress leader said in another post.

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“All of this is consistent with a long record of fraud and criminality carried out with impunity with the obvious protection of the Prime Minister,” Ramesh charged.

Other Oppn leaders join attack

Other opposition leaders joined the attack. Trinamool Congress MP Saket Gokhale questioned the BJP’s involvement in Adani’s dealings and demanded an independent judicial probe.

Aam Aadmi Party leader Sanjay Singh accused PM Modi of allowing Adani to tarnish India’s global reputation.

ALSO READ- Adani Group shares plunge after US SEC charges, Adani Green down 16%

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Adani stocks latest updates

The allegations rattled markets, with Adani Group stocks plunging. Adani Enterprises fell 20 per cent in pre-open trade, while shares of Adani Ports, Adani Green, Adani Power, and others dropped between 7 per cent and 18 per cent.

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