By Aditya Raghunath
Investing.com — After the US Federal Reserve said that it would increase rates a couple of times in 2023, stock markets around the world have gone into a sell-off. Even though and the bounced back to end flat on Friday, they are down 0.42% and 0.4% as of this report.
One direct effect of the Fed’s announcement was that the US dollar got stronger. Last Monday, the USD to INR was Rs 73.18. The last week saw it slip below Rs 74 and is currently at Rs 74.15. A stronger dollar has multiple implications on Indian stock markets.
Fitch Solutions said it expects the rupee to remain weak over a long term. “We expect the central bank to continue intervening to maintain relative rupee stability in order to manage imported inflation arising from high global oil prices. This will mitigate the depreciatory pressures from loose monetary and fiscal policy in India, as well as worsening terms of trade stemming from elevated global oil prices. The technical outlook suggests that rupee weakness is more likely over the longer term, despite our view for sideways trading to prevail in the short term,” it said.
Companies in the IT and pharma sector are beneficiaries of a stronger dollar as they export most of their services and products, and receive a majority of their revenues in dollars.
A stronger dollar also means more expensive oil. India is the third-largest importer of . This will lead to a higher crude oil bill for India which means petrol and diesel will get more expensive. Shares of companies like Indian Oil Corporation Ltd (NS:), Oil India Ltd (NS:), Hindustan Petroleum Corporation Ltd (NS:) and Bharat Petroleum Corp. Ltd. (NS:) will be affected.
Foreign institutional investors (FIIs) will get lesser returns on their dollar investments. This could mean that FIIs will start withdrawing their funds out of India.