Currency moves to guide equity marts

Crushed by global jitters, it was sea of red across the global markets during the week ended. On the Bombay Stock Exchange, the Sensex shed 701 points to close at 27,366 and the Nifty ended 218 points lower at 8,299. Rupee weakness against dollar triggered renewed FII selling.

 

Though deprecating rupee is positive for sectors like IT and Pharma, new challenges will emerge for economy fear observers. 

 

Three factors continue to hover over the global markets — concerns that China’s economy is slowing faster than its government has said; uncertainty over whether the US Federal Reserve will raise its benchmark interest rate in September; and the effect of cheap oil, which has dropped to its lowest point in over six years. Emerging market currencies are falling like dominoes. 

 

Brazil’s real and Kazakhstan’s tenge fell 9 per cent and 20 per cent in the last few weeks. Colombia, Chile, Vietnam and Indonesia have also seen significant currency drops against the dollar. 

 

Near term direction of the markets will be dictated by a host of global and domestic factors like currency volatility, the United States’ interest rate decision, progress of monsoon and

reform steps from government.

 

For the week ahead, chartists predict trading range of 26,650 to 27,750 for the Sensex and 8,100 to 8,400 for the 50-Nifty. Immediate supports for the indices are at 27,000 and 27,650 and 8,200 and 8,100.