New Delhi [India], August 2 : Indian stock indices traded sharply lower Wednesday and settled in the red with widespread losses in all sectoral indices. The decline was primarily due to weak market sentiment in global markets.
Fitch Ratings downgrading the US’ sovereign credit rating is also likely to have weighed on the stocks back home. It has downgraded the US sovereign credit rating by one level from AAA to AA+ on the basis of “expected fiscal deterioration over the next three years, a high and growing general government debt burden.”
Sensex and Nifty today closed one per cent lower from their previous day's closing. All Nifty sectoral indices were in the red, with Nifty auto, Nifty media, Nifty metal, Nifty PSU bank, Nifty private bank, and Nifty realty declining the most.
“Global stocks fell as a result of Fitch Ratings' reduction of the US sovereign credit grade, which prompted a quick retreat from risky assets,” said Om Mehra, Equity Research Analyst, at Choice Broking.
Almost a fortnight ago, Indian stock indices had touched their fresh highs and in the process, the benchmark Sensex topped the 67,000 mark for the first time.
The consistent inflow of foreign portfolio funds (net buyers in Indian stock markets for the fifth straight month), firm economic outlook, firm global markets, and a relative moderation in inflation contributed to the latest bull run in Indian stocks.
However, in the past few sessions, there has been a consistent but steady decline in both indices, partly attributable to profit booking by investors on fears of high stock valuations, something flagged by analysts.
“Since Fitch began to lower the evaluation to AA+, it proves that the uncertainties of the US economic system will gradually increase in the future, which will put pressure on the Indian equities market in the short term and expect the gold market to continue to be beneficial in this circumstance,” said Jayden Ong, Senior Market Analyst, APAC, Vantage.
However, according to Mukesh Kochar, National Head-Wealth, AUM Capital, the impact on the Indian market is expected to be short-lived and other factors such as earnings, crude prices and RBI policy next week, and fund inflows will be the key to the market.
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