Investors turn cautious amidst high inflation and currency volatility
RBI in Q3. The Indian Ocean Dipole, which was positive last month has turned neutral. August month’s rainfall is forecast to be the driest since 1901.
An increase in the heat level of the land will affect the yield production in 2023. Also read: Pyramid Technoplast IPO: Issue fully booked on day 1; here's what GMP signals The domestic market has undergone consolidation in the preceding month. While elevated CPI levels may have introduced some instability, the primary disruption arises from significant turmoil in the global currency market.
DXY (the USD value index) has increased from sub-100 to 103.6, indicating an increase in the value of the dollar despite a downgrade in credit rating from AAA to AA+ by Standard & Poor’s rating agency. This paradoxical appreciation of the USD persists even amid a mounting fiscal deficit and economic frailty, inducing apprehension in the global market and arising tendency to move to safe haven assets like USD currency. FII outflow increased in the last month.
However, selling in Indian equity is lower compared to other EMs. For example, FIIs total net inflow in India’s equites (Primary + Secondary market) continue to be positive at ₹8,400cr as per NSDL data. While heavy selling is noticed in other EMs like Taiwan, S.
Korea and Indonesia this month. Read all market stories here In its August policy statement, the RBI revised its forecast upward and acknowledged the potential for additional upside risks. At present, the RBI foresees a reduction in inflation from 6.2% to 5.7% in Q3.
The FY24 CPI forecast has been increased by only 30 basis points to 5.4%. However, the factual data for July indicates a heightened risk beyond both market and RBI predictions. On a small note, the move to
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