RBI’s 50 bps Hike on Cards; Sweet Spot for Nifty 50 Bottom?

  • Market Overview

The Reserve Bank of India (RBI) is all set to continue the trend of increasing interest rates on 30 September 2022 when it is expected to go for a 50 bps hike which would shoot the current repo rate of 5.4% to 5.9%. The RBI has already increased 140 bps this year and the next hike would probably not be less than 50 bps as it has many challenges to face. Also, the RBI in its previous MPC stated that a ‘50 bps hike is the new normal’. 

The US Fed seems to be going all guns blazing when it comes to increasing interest rates . Despite a 75 bps hike in the third straight meeting, Jerome Powell signaled that it might continue to tighten its monetary policy throughout the year which torpedoed the currencies of both developing markets and emerging markets to multi-year lows.  

The rupee was also one of the currencies to face the rout. The record plunge of the rupee is already putting a strain on the forex reserves of the country which are already down to US$545.6 billion, from US$642.02 billion in November 2021. The RBI can’t continue to use reserves perpetually and needs to minimize the interest rate differential between the US and India to stop fund outflow. 

Inflation is also one factor that needs to be taken care of. The August CPI data came in at 7%, which was a noticeable uptick from 6.71% in July 2022. Inflation is expected to moderate below the RBI’s tolerance range of 6% on the upside, by Q4 FY23 but it might remain elevated over the next immediate months, all thanks to the lagging effect of rate hikes. Although, it seems like the worst is over, especially looking at the crude oil prices comfortably sustaining around US$90 per barrel, the way the rupee had been torpedoed in the last couple of weeks, the imported inflation is likely to sustain at higher levels.

Now, the rate hike is imminent, the only question is by how much. If the RBI goes for a 50 bps hike, the Nifty 50 could mark a temporary bottom here as it is also hovering at very strong support of 16,800. Also, the relentless fall in the last few session has probably already discounted it. However, a lower than 50 bps hike might trigger another wave of sell-off in the currency market which would not be a good sign. Anything above 50 bps would skew RBI’s stance to a more hawkish one which again could be troublesome for the markets. In my opinion, a 50 bps hike could be a sweet spot for the markets to take support. 

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  • Ramu Duguru @Ramu Duguru
    sir nifty 17100 pe holding any chance downside
    Like 0
  • Ramu Duguru @Ramu Duguru
    sir nifty 17100 pe holding any chance downside
    Like 0
  • Dhiraj Batra @Dhiraj Batra
    most of your analysis are good and it gives kind of direction as what is to be done.. quite helpful.Good going
    Like 1
  • Ayush K Pal @Ayush K Pal
    Ha ha ha... 50 bps hike and another sell off?? Analysis 🙄🙄🙄
    Like 0
    • Aayush Khanna/Investing.com @Aayush Khanna/Investing.com
      You need to work on your comprehension skills.
      Like 1
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  • Prashant Pungliya @Prashant Pungliya
    Nifty 14900 in months to comeWeekly MACD negative crossover soonMonthly bearish engulfing - about to be MAcD giving sell on monthly tooDaily oversold will hive bounces Sell on rise Monthly lower bollinger bands at 14800
    Like 5
  • anand kishor @anand kishor
    35 bp hike only as internal clue I got
    Like 1
    • Neetesh Jain @Neetesh Jain
      💯 % agreed. 35 bp tmrw
      Like 0
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  • Mohammed Jamiruddin @Mohammed Jamiruddin
    Nifty will touch 14600 soon at the end of year
    Like 1
    • DEvIL HaCKeT @DEvIL HaCKeT
      not work like this.technical analysis shows another picture
      Like 0
    • DEvIL HaCKeT @DEvIL HaCKeT
      not work like this.technical analysis shows another picture
      Like 0
    • DEvIL HaCKeT @DEvIL HaCKeT
      not work like this.technical analysis shows another picture
      Like 0
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  • nitin gupta @nitin gupta
    15300 is the first Target for nifty..
    Like 4
    • satish Yadav @satish Yadav
      nord stream 2 destroyed any effect on ongc?
      Like 0
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  • Sunil Parakkal @Sunil Parakkal
    not so good analysis. Bcos more rate hikes are on the cards in the coming months and nifty will go down with every rate hike. So I can't see the bottom anywhere near this price range
    Like 1
  • Kirti Sidhpura @Kirti Sidhpura
    good analysis
    Like 1
  • Yog Patel @Yog Patel
    kal dollar up side jayega ya down side
    Like 0
    • Alok Singh @Alok Singh
      If RBI increases the rate then dollar will go down
      Like 1
    • Anil Selarka @Anil Selarka
      What most people do not realize is that we are going through the worst form of currency crisis, nearly 4 times stronger and larger than the Asian Currency Crisis, when only Asian currencies were falling. This time around the non dollar developed countries are falling through the bottom. The £ down by 26%, € down by 24% and Japanese ¥ down by 29%, and Chinese Yuan or Renminbi down by 13% in one year. All these countries hold over $5 trillions of Forex reserve. This is the most serious issue. This is worst form of currency rout in last 90 years.
      Like 1
    • kadar supermarket @kadar supermarket
      how will it effect our markets
      Like 0
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  • var var @var var
    well analysis
    Like 3

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