The Nifty 50 index retreated to its lowest level since June 7 last year as the Indian rupee continued its downtrend against the US dollar. It also dropped as several prominent Indian companies published weak financial results. It has moved to ₹23,200, down by almost 12% from the highest level in 2024.
Indian rupee has crashed
The Nifty 50 index continued its downtrend as concerns about the Indian economy continued. That explains why the Indian rupee has continued crashing in the past few months. Data shows that the USD/INR exchange rate has risen to a record high of 86.50, up from last year’s low of 82.65.
The Indian rupee has crashed against the US dollar for several reasons. First, the US dollar index jumped to $110 after the Federal Reserve turned hawkish in its last meeting. The bank slashed interest rates by 0.25% and hinted that it would deliver two cuts later this year.
Second, there are concerns that the Indian economy has slowed in the past few months. The most recent data showed that the Indian GDP grew by 5.4% in the third quarter, lower than expected. As such, there are concerns that the Indian economy will not hit the 7% target it has been used to before.
Further, the Indian rupee has crashed in line with the ongoing retreat of emerging market currencies. Some of the most notable currencies that have crashed recently are the Chinese yuan, Turkish lira, and the South African rand.
A weaker Indian rupee has an impact on the country’s stocks. Some, like technology companies Infosys (NS:INFY), TCS, and L&T Tech that do a lot of business abroad do well since they are paid in the US dollar and report in the Indian rupee.
However, a weaker rupee negatively impacts local companies that import many raw materials from foreign countries.
The Nifty 50 index has also retreated after the recent earnings misses by some Indian tech companies.
Firms like Tata Consultancy Services (NS:TCS), Infosys, and Tech Mahindra (NS:TEML) have announced results that missed analysts estimates. Just last week, analysts at HSBC downgraded Indian stocks, citing their inflation numbers.
Looking ahead, the next key earnings to watch will be Zomato (NS:ZOMT), ICICI, Aditya Birla (NS:ADTB), Trident (NS:TRIE), HDFC Bank (NS:HDBK), Interglobe Aviation, Tata Communications (NS:TATA), and Adani Green Energy (NS:ADNA).
Nifty 50 index analysis
Nifty chart by TradingView
The daily chart shows that the Nifty 50 index peaked at ₹26,255 in 2024 and then pulled back sharply in the past few weeks. It has dropped to a low of ₹23,200, its lowest level since June last year.
The index is about to form a death cross pattern as the 200-day and 50-day Exponential Moving Aveages (EMA) cross each other. Also, the MACD and the Relative Vigor Index (RVI) have continued falling.
The index has formed a head and shoulders chart pattern, a popular bearish sign. Therefore, the Nifty index will likely continue falling as sellers target the next key support at ₹20,000, down by almost 40% from the current level.