Shaky ground | Markets closed lower. RBI comes to the rupee’s rescue.

Greetings, people! NASA has released the clearest image of the 'early universe' using the $10 billion James Webb Space Telescope. How we wish there was a telescope that showed a clear image of the markets, so that we could make better decisions!

Benchmark indices remained weak and closed in the red amid volatility across global markets. In all, 44 of the Nifty50 stocks closed lower.  The rupee slumped to a fresh low of 79.68 against the dollar. More on that below. Among the Nifty sectoral indices, Metal (-1.2%) and Auto (-1.1%) were the top losers. Meanwhile, Realty (0.1%) was the sole gainer today.

NIFTY50 16,058  157 (-0.9%) SENSEX 53,886  508 (-0.9%)

What's UP  STOCK TODAY'S CHANGE NTPC 146  2.0 (+1.4%) Coal India 193  0.4 (+0.2%) Shree Cement 19,890  35 (+0.1%)

What's Down  STOCK TODAY'S CHANGE Eicher Motors 2,945  101 (-3.3%) Hindalco 346  9.9 (-2.7%) Infosys 1,437  36 (-2.4%)

What’s trending?

HCL’s Q1 results meet expectations  HCL Tech's Q1 revenues at ₹23,464 crore were in line with estimates, rising 3.8% quarter-on-quarter (QoQ). The net profit also met market estimates, despite an 8.6% QoQ fall to ₹3,283 crore. Meanwhile, the company’s attrition rate fell to 11.8% for the 12-month period ending 30 June 2022, compared to 21.9% at the end of March 2022.  Should govt privatise most PSBs?  SBIN (NSE): 483.4  4.8 (-0.9%) According to economic policy think tank National Council of Applied Economic Research (NCAER), the government should privatise all public sector banks (PSBs) except the State Bank of India (SBI). NCAER believes that government ownership hinders the RBI’s ability to regulate the sector. NCAER also said PSBs other than SBI lag behind private banks in major indicators of performance and have attained lower returns on assets and equity.  Murugappa Group to enter EV sector  TIINDIA (NSE): 2,015  41 (-2.0%) Murugappa Group is set to invest ₹200 crore to launch an electric three wheeler by September 2022. The vehicle will be launched both in passenger and cargo segments. The company will invest ₹200 crore in electric three wheelers. The EV business falls under Tube Investments of India, which is a part of the Murugappa Group. It will also manufacture electric tractors this year through a subsidiary.  Ahluwalia Contracts bags big order  AHLUCONT (NSE): 442.9  28 (+6.7%) Shares of construction company Ahluwalia Contracts jumped 10% intraday. The company announced that it has secured a construction order worth ₹150 crore from a non-profit organisation. The company’s total order inflow in the current fiscal year stands at ₹863 crore.  June inflation remains elevated  The retail inflation in June stood at 7.01%, marginally down from 7.04% in May and below the market estimate of 7.03%. However, it still remained above the RBI’s 6% threshold for the sixth straight month.

RBI comes to the rupee’s rescue

The Indian rupee continued to slide, touching yet another low of 79.64 against the US dollar. It has declined nearly 6.7% since the start of the year. However, the RBI has stepped in, to save the rupee from further depreciation. First, let's try to understand why the rupee has been falling. The first reason is that foreign portfolio investors (FPIs) are pulling out money from the Indian markets at unprecedented levels. They've been net sellers of $30.3 billion worth of Indian assets so far in 2022. To make it worse, the rising import cost of crude, gold and other commodities have also put pressure on the rupee. But the RBI has now announced a series of measures to stop the rupee from depreciating further. It has introduced a mechanism through which the payment for exports/imports by traders will be made in rupees. This will increase the use of the rupee in foreign trades and reduce the demand for the dollar. It will particularly be useful for trade with neighbouring countries that are willing to use rupee as a base currency for trade. Further, to attract FPIs to the Indian debt market, the central bank has relaxed the 30% short-term investment limit. This means all investments made by FPIs till 31 October 2022 in government securities and corporate debt will be exempt from this limit.  However, the success of these measures will depend on the country's inflation rate. High inflation has resulted in a negative real interest rate (which refers to the difference between the inflation rate and the nominal interest rate). This has prevented overseas investors from parking funds in the Indian debt market. And the RBI's attempts to protect the rupee from decline could be in vain if the US dollar continues to appreciate. ICYDK the fear of a looming recession has increased the attractiveness of safe-haven assets like the US dollar.