After
a stellar show last year, the Indian economy has hit a rough patch amid
mounting concerns about the euro area debt crisis and anemic US growth.
The weakened macro-economic fundamentals are reflecting in the large
twin deficits, which in turn are hurting the rupee. A depreciating rupee
is bad news.
The
recent sharp selling in stocks can be partly attributed to rupee’s
fall. It may hit new lows shortly. The RBI says it is risky to try and
prop up the currency.
In
short, there is more pain ahead. The start is again going to be lower,
as world equities continue to slide. Rising borrowing costs for the
debt-stricken eurozone nations is unnerving global investors. US markets
closed down while the VIX was up 3%. European benchmarks too dropped.
Asian indices are mostly in the red.
There
may be some recovery but don’t expect any sustained rebound given the
severity of the headwinds. A weekly closing below 4980 will sour the
mood further. Next major support is placed at 4700. Retail stocks will
be in action amid reports that the Cabinet will consider FDI in
multi-brand retail.
