Dalal Street: Dollar’s surge hits Dalal Street, again – Blue Barrows

Mumbai: Equities got off to a rough start in September, with India’s stock indices declining 1.3% on Thursday as expectations of higher interest rates in the US drove up the dollar. Foreign portfolio investors (FPIs) net sold shares worth ₹2,290 crore on Thursday as the Volatility Index or VIX – the market’s fear gauge – rebounded 6.3%, suggesting that options traders see near-term market risks.

BSE’s Sensex fell 770.4 points or 1.29% to close at 58,766.5. NSE’s Nifty dropped 216.5 points or 1.22% to end at 17,542.8. Mid- and small-cap shares ended higher, bucking the weakness in blue chips. The Mid-cap 150 and Small-cap 250 indices advanced almost 0.3% each.

On Tuesday, the Sensex and Nifty jumped 2.7% – their biggest single-day gains in four months. Markets were shut on Wednesday for Ganesh Chathurthi. Analysts said the sell-off on Thursday was on account of fresh risk-off sentiment globally with markets in Asia and Europe sliding.

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Money managers and analysts said the mix of tighter liquidity conditions and risk of a recession in the US and Europe could put a lid on equity returns.

“The next few months are likely to become difficult for investors, and I think it is time to be prudent and reduce risk,” said Michael Strobaek, global chief investment officer, Credit Suisse, which has reduced its equity allocation to underweight after US Federal Reserve chair Jerome Powell’s stern message on August 26 that interest rates may have to stay higher to contain inflation even if that means a downturn.

“We also now believe the absolute return outlook for equities is outright unattractive in the coming months.”

Indian stocks have swung between gains and losses every day this week after Powell’s hawkish remarks as domestic investors believe Dalal Street may be less vulnerable to global headwinds.